Research
I use experimental methods to examine how psychological and economic factors shape market participants’ judgments and decisions. In particular, my research investigates how these factors influence the accounting information managers produce and how investors interpret and use that information when making investment decisions.
Working Papers
Estimating Exit Prices: Managerial Bias in Entity-Specific and Fair Value Estimates
The Financial Accounting Standards Board recently acknowledged entity-specific measurement as a relevant measurement basis for assets and liabilities. Entity-specific measurement relies on a firm’s own assumptions, raising concerns about bias, whereas fair value requires a market participant perspective that is intended to improve objectivity and constrain bias. Using two experiments in the setting of asset retirement obligations, I examine whether fair value achieves this objective. I find that fair value eliminates bias when strong market-based inputs allow managers to substitute an external benchmark for their internal assumptions, but offers no protection as those inputs weaken and can produce greater bias than entity-specific measurement. These findings show that the relative quality of the two measurement bases depends not on the perspective they require but on the informational environment.
Solo-authored dissertation
Standardized but Not Comparable: Effects of Standardized ESG Metrics on Retail Investors’ Perceived Competence and Delegation in Investment Decisions
With Brian White, Kristi Rennekamp, and Xinyu Zhang
This paper examines how standardized but potentially ambiguous ESG metrics affect retail investors’ perceived competence and investment decisions. We find that presenting ESG information in a standardized format increases sustainability-focused investors’ confidence in their ability to evaluate ESG information, even when standardization does not improve the mix of information provided. This heightened sense of competence makes these investors less willing to delegate investment decisions to a professional. Our findings identify a potential unintended consequence of ESG standardization. Information that appears more comparable may encourage investors to rely more heavily on their own judgments without improving the quality of those judgments.
Disclosure Preparation and Managers’ Explanations for Performance
With Michael Durney, Ryan Guggenmos, and Kristi Rennekamp
Managers frequently explain firm performance in settings that require them to respond in real time. We examine how preparing a disclosure in advance, rather than constructing it during the disclosure, affects the explanations managers provide for firm performance. In particular, we focus on the cognitive load managers experience in unscripted settings, such as meetings in which they must respond immediately to questions about performance. We find that greater cognitive load leads managers to attribute performance more to internal factors, with this effect particularly pronounced following poor performance. The research highlights how the process through which a disclosure is produced can unintentionally shape the explanations communicated to information users.
Features of Platform-Provided Financial Education: Effects on Retail Investors
With Kristi Rennekamp and Xinyu Zhang
Digital trading platforms increasingly provide their users with financial education in addition to investment services. Across three experiments, we examine the effects of free access, curated presentation, and empowerment framing on retail investors. We find that free education makes investors more willing to use a platform, while curated education increases their confidence without necessarily improving their financial knowledge. Empowerment framing increases confidence and self-directed investing when the education comes from a nonprofit, but not when it comes from a commercial trading platform. Together, these findings show that the design and source of financial education can shape investors’ behavior without necessarily improving their ability to make decisions.