Abstract
This dissertation investigates investors' reliance on corporate voluntary disclosures of nonfinancial information through two studies consisting of three experiments. Study one uses two experiments to examine to what extent nonprofessional investors rely on voluntarily disclosed nonfinancial information relative to mandatory financial statements and whether their reliance on nonfinancial information depends on several input factors and a process factor: investment experience, investment horizon, disclosure format, and cognitive process. In experiment one, we find that investors' investment decisions are more affected by financial information than by nonfinancial information. Interestingly, nonfinancial disclosures affect high-experience investors more than low-experience investors. Similarly, providing nonfinancial disclosures leads to an increased interest in the equity investment among investors with long-term investment horizon, but not among those whose investment horizon is short-term. Furthermore, the underreliance of nonfinancial information caused by the short-term investment horizon is more pronounced for low-experience investors than for high-experience investors. Consequently, whether to provide nonfinancial performance measures does not affect the capital allocation decisions when low-experience investors invest for short-term returns. In experiment two, we examine two interventions. One intervention requires participants to evaluate the firms separately based on the financial and nonfinancial measures. The other intervention presents the nonfinancial measures in a more readable format. We find that neither of the interventions alone significantly alters the influence of the nonfinancial disclosures for low-experience/short-term investors. However, when the two interventions are used jointly, nonfinancial information significantly affects those investors' investment decisions. Study two aims to assess whether presenting nonfinancial measures in a causally linked format affects the decision-making process of individual investors and whether its effect varies across different financial situations. The results suggest that when controlling for financial performance, investors invest more money when the company provides causally linked nonfinancial measures than when the identical measures are not causally linked. The results also show that causal linkage affects investment decisions more when the financial performance is unfavorable than when it is favorable. The mediation test reveals that causal linkage influences investment decisions via its effect on investors' perceived relevance of the NFMs.