The impact of financial accounting disclosures on investors’ reactions towards bad news: The moderating role of investors’ sentiments

Figures & data

Figure 1. Research conceptual model and hypotheses.

Figure 2. The study model before moderation.

Figure 3. The study model after moderation.

Figure 4. Research outcome: a conceptual model.

Table

No	Factor	Category
1	Age	22–30▭	31–40▭	41–50▭			51–60▭	61 Above▭
2	Gender	Male▭				Female▭
3	Education Level	Diploma▭	Bachelor▭	Master▭			PhD▭		Other – Please Mention (—————-)
4	Number of Years of Experience in Investment in Project based organizations	1–5▭	6–10▭	11–15▭			16–20▭			21 Above▭
5	Monthly income (AED)	Below 10,000▭	10,000 to 50,000▭		50,000 to 100,000▭		100,000 Above▭

Table

No	Investors’ rights: The organization provides information about	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
1	Details of articles of association.
2	Related party transactions, “Policies governing related parties’ transactions” or pricing policies and terms.
3	Treasury stock held by the company, description of share classes, or any change in substantial holdings.
4	Convertible securities/bonds/stock dividends–options/bonus shares/dilutive instruments.
5	Proposed dividends, basic Earnings Per Share EPS or diluted EPS
6	(Change in) subsidiaries
No.	Board and management structure and processes: The organization provides information about	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
7	Members of board of directors and any changes in its structure
8	Details about the remuneration system applied to the board of directors
9	The competencies required for assigning members in the Board of Directors and Top Management.
10	List of board committees such as: audit, remuneration, risk management and governance committees.
No.	External auditing and audit service: The organization provides information about	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
11	Auditor name and audit and professional fees.
12	Major findings of external audit investigations

Table

No.	Transparency disclosure: The organization provides information about	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
13	The company’ s accounting policy and Legal accounting requirements.
14	Chairman’s or Board of Directors statements about auditing processes
15	Internal control function of internal audit
16	Disclosure of financial risks, risk management or any potential risks.
17	Corporate governance statement and awareness
18	The rating of the company by other markets, investment banks or rating agencies
19	Disclosure of matters related to the AGM/statement concerning corporate social responsibility
20	Disclosure of penalties and sanctions against or by the company
21	Regulatory framework management

Table

No.	Other disclosure channels; The organization provides via the corporation’ websites, forums, Press releases; TV, Radio, News, blogs, on-line announcements and other communication channels…etc, up-to-date information	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
22	Accessible details about the company’ s annual and quarterly reports, voluntary announcements, and disclosure of non-financial information
23	Accessible details about the minutes of General Meeting, in relation to the company’s constitution (company’s bylaws, memorandum, and articles of association).
24	About the contact details of the officer responsible for investor relations

Table

No.	Subjective norm: when taking investment decisions, I consider	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
25	Broker recommendation
26	Family member opinions
27	Friend recommendations
28	Opinions of the firm’s majority stockholders
29	Financial advisors and analysts’ recommendation

Table

	No.	Investors’ reactions towards bad financial news	Strongly Agree	Moderately Agree	Slightly Agree	Uncertain	Slightly Disagree	Moderately Disagree/	Strongly Disagree
Governance and disclosure awareness related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	30	I associate bad news to some governance disclosure problems.
	31	I associate bad news to insufficient knowledge about the issues of cost governance and disclosure index.
	31	I associate bad news to the risk of governance and disclosure
	32	I associate bad news to lack of updates about governance and disclosure issues.
Information quality (info Q) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	33	I associate bad news to lack of accurate information disclosed by the firm.
	34	I associate bad news to lack of reliable information disclosed by the firm.
	35	I associate bad news to lack of useful information disclosed by the firm.
	36	I associate bad news to lack of timely information disclosed by the firm.
Trust in firm’s disclosure channels (trust) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets:	37	Untrustworthy channels of disclosure publishing do not inform investors about bad news.
	38	Unofficial channels of disclosure publishing are not committed to inform investors about bad news.
	39	Channels of disclosure publishing that take investors best interests in mind inform the investors about bad news.
Perceived benefits of the disclosure index (benefits) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets:	40	I believe that the disclosure index is transparent when it informs the investors about the firm’s bad news.
	41	I believe that the disclosure index must improve communications about the firm’s readiness to deal with bad news.
	42	I believe that the disclosure index enhances investors’ confidence in the firm’s integrity while dealing with bad news.
	43	I believe that the disclosure index helps mitigate investment risks that are related to the firm’s response to bad news.
Investment intentions (behavioral intention), related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	44	I would prefer to invest my money in a firm that voluntarily provides information about its bad news as recommended by IFRS and government requirements.
	45	I would prefer to invest my money in a firm whose disclosure index has been examined by international professional bodies and accredited auditors.
	46	I would still consider investing my money in a firm that voluntarily discloses information about its bad news in its disclosure index.
Investor’s judgement	47	I consider bad news and good news about companies and therefore I overreact or under react while making investment decisions.
perceived ease of use	48	When I get information about bad news easily, I overreact or under react in decision making process.
Perceived privacy	49	When I perceive confidential information about bad news, I overreact or under react in making an investment decision.
Perceived risk and system security	50	When I perceived the risk of governance and disclosure, I overreact or under react to it.

Table

Age	Age
Gender	Gender
EduLev	EduLev
YesrsoffExper	YesrsoffExper
income	income

Table

No	Investors’ rights: The organization provides information about	items	Latent
1	Details of articles of association.	IR1	CFAD1
2	Related party transactions, “Policies governing related parties’ transactions” or pricing policies and terms.	IR2	CFAD2
3	Treasury stock held by the company, description of share classes, or any change in substantial holdings.	IR3	CFAD3
4	Convertible securities/bonds/stock dividends—options/bonus shares/dilutive instruments.	IR4	CFAD4
5	Proposed dividends, basic Earnings Per Share EPS or diluted EPS	IR5	CFAD5
6	(Change in) subsidiaries	IR6	CFAD6

Table

No.	Board and management structure and processes: The organization provides information about	items	Latent
7	Members of board of directors and any changes in its structure	BOMS1	CFAD7
8	Details about the remuneration system applied to the board of directors	BOMS2	CFAD8
9	The competencies required for assigning members in the Board of Directors and Top Management.	BOMS3	CFAD9
10	List of board committees such as: audit, remuneration, risk management and governance committees.	BOMS4	CFAD10

Table

No.	External auditing and audit service: The organization provides information about	items	Latent
11	Auditor name and audit and professional fees.	EAUS1	CFAD11
12	Major findings of external audit investigations	EAUS2	CFAD12

Table

No.	Transparency disclosure: The organization provides information about	items	Latent
13	The company’ s accounting policy and Legal accounting requirements.	TPD1	CFAD13
14	Chairman’s or Board of Directors statements about auditing processes	TPD2	CFAD14
15	Internal control function of internal audit	TPD3	CFAD15
16	Disclosure of financial risks, risk management or any potential risks.	TPD4	CFAD16
17	Corporate governance statement and awareness	TPD5	CFAD17
18	The rating of the company by other markets, investment banks or rating agencies	TPD6	CFAD18
19	Disclosure of matters related to the AGM/statement concerning corporate social responsibility	TPD7	CFAD19
20	Disclosure of penalties and sanctions against or by the company	TPD8	CFAD20
21	Regulatory framework management	TPD9	CFAD21

Table

No.	Other disclosure channels; The organization provides via the corporation’ websites, forums, Press releases; TV, Radio, News, blogs, on-line announcements and other communication channels…etc, up-to-date information	items	Latent
22	Accessible details about the company’ s annual and quarterly reports, voluntary announcements, and disclosure of non-financial information	ODCH1	CFAD22
23	Accessible details about the minutes of General Meeting, in relation to the company’s constitution (company’s bylaws, memorandum, and articles of association).	ODCH2	CFAD23
24	About the contact details of the officer responsible for investor relations	ODCH3	CFAD24

Table

No.	Subjective norm: when taking investment decisions, I consider	items	Latent
25	Broker recommendation	SBN1	IS37
26	Family member opinions	SBN2	IS38
27	Friend recommendations	SBN3	IS39
28	Opinions of the firm’s majority stockholders	SBN4	IS40
29	Financial advisors and analysts’ recommendation	SBN5	IS41

Table

	No.	Investors’ reactions towards bad financial news	items	Latent
Governance and disclosure awareness related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	30	I associate bad news to some governance disclosure problems.	GDAWAR1	IRBFN1
	31	I associate bad news to insufficient knowledge about the issues of cost governance and disclosure index.	GDAWAR2	IRBFN2
	31	I associate bad news to the risk of governance and disclosure	GDAWAR3	IRBFN3
	32	I associate bad news to lack of updates about governance and disclosure issues.	GDAWAR4	IRBFN4
Information quality (info Q) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	33	I associate bad news to lack of accurate information disclosed by the firm.	IQ1	IRBFN5
	34	I associate bad news to lack of reliable information disclosed by the firm.	IQ2	IRBFN6
	35	I associate bad news to lack of useful information disclosed by the firm.	IQ3	IRBFN7
	36	I associate bad news to lack of timely information disclosed by the firm.	IQ4	IRBFN8
Trust in firm’s disclosure channels (trust) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets:	37	Untrustworthy channels of disclosure publishing do not inform investors about bad news.	T1	IRBFN9
	38	Unofficial channels of disclosure publishing are not committed to inform investors about bad news.	T2	IRBFN10
	39	Channels of disclosure publishing that take investors best interests in mind inform the investors about bad news.	T3	IRBFN11
Perceived benefits of the disclosure index (benefits) related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets:	40	I believe that the disclosure index is transparent when it informs the investors about the firm’s bad news.	PBDINX1	IRBFN12
	41	I believe that the disclosure index must improve communications about the firm’s readiness to deal with bad news.	PBDINX2	IRBFN13
	42	I believe that the disclosure index enhances investors’ confidence in the firm’s integrity while dealing with bad news.	PBDINX3	IRBFN14
	43	I believe that the disclosure index helps mitigate investment risks that are related to the firm’s response to bad news.	PBDINX4	IRBFN15
Investment intentions (behavioral intention), related to firm-image, termination of loss-making projects and fluctuation of share market price in financial markets.	44	I would prefer to invest my money in a firm that voluntarily provides information about its bad news as recommended by IFRS and government requirements.	IIN1	IRBFN16
	45	I would prefer to invest my money in a firm whose disclosure index has been examined by international professional bodies and accredited auditors.	IIN2	IRBFN17
	46	I would still consider investing my money in a firm that voluntarily discloses information about its bad news in its disclosure index.	IIN3	IRBFN18
Investor’s judgement	47	I consider bad news and good news about companies and therefore I overreact or under react while making investment decisions.	IJD1	IRBFN19
perceived ease of use	48	When I get information about bad news easily, I overreact or under react in decision making process.	PEU1	IRBFN20
Perceived privacy	49	When I perceive confidential information about bad news, I overreact or under react in making an investment decision.	PP	IRBFN21
Perceived risk and system security	50	When I perceived the risk of governance and disclosure, I overreact or under react to it.	PR1	IRBFN22

Table

Model	NPAR	CMIN	DF	P	CMIN/DF
Default model	161	2695.080	1064	.000	2.533
Saturated model	1225	.000	0
Independence model	49	15982.281	1176	.000	13.590

Table

Model	RMR	GFI	AGFI	PGFI
Default model	.096	.753	.716	.654
Saturated model	.000	1.000
Independence model	.543	.151	.116	.145

Table

Model	NFI Delta1	RFI rho1	IFI Delta2	TLI rho2	CFI
Default model	.831	.814	.891	.878	.890
Saturated model	1.000		1.000		1.000
Independence model	.000	.000	.000	.000	.000

Table

Model	PRATIO	PNFI	PCFI
Default model	.905	.752	.805
Saturated model	.000	.000	.000
Independence model	1.000	.000	.000

Table

Model	NCP	LO 90	HI 90
Default model	1631.080	1481.845	1787.936
Saturated model	.000	.000	.000
Independence model	14806.281	14401.342	15217.660

Table

Model	FMIN	F0	LO 90	HI 90
Default model	8.722	5.279	4.796	5.786
Saturated model	.000	.000	.000	.000
Independence model	51.723	47.917	46.606	49.248

Table

Model	RMSEA	LO 90	HI 90	PCLOSE
Default model	.070	.067	.074	.000
Independence model	.202	.199	.205	.000

Table

Model	AIC	BCC	BIC	CAIC
Default model	3017.080	3079.242	3618.668	3779.668
Saturated model	2450.000	2922.973	7027.301	8252.301
Independence model	16080.281	16099.199	16263.373	16312.373

Table

Model	ECVI	LO 90	HI 90	MECVI
Default model	9.764	9.281	10.272	9.965
Saturated model	7.929	7.929	7.929	9.459
Independence model	52.040	50.729	53.371	52.101

Table

Model	HOELTER.05	HOELTER.01
Default model	131	135
Independence model	25	25

Table

Variable	Item	Frequency	Percentage
Gender	Male	161	51.9%
	Female	149	48.1%
Age	22–30	99	31.9%
	31–40	134	43.2%
	41–50	54	17.4%
	51–60	21	6.8%
	61+	2	0.6%
Years of Experience	1–5 years	37	11.90%
	6–10 years	185	59.70%
	11–15 years	60	19.40%
	16–20 years	20	6.50%
	21+ years	8	2.60%
Monthly income	less than 10,000 AED	100	32.30%
	10,000 AED − 50000 AED	180	58.10%
	50,000 AED − 100,000 AED	23	7.40%
	above 100,000 AED	7	2.30%

Table

Variable code	Std. Deviation	Variance	Skewness	Std. Error of Skewness	Kurtosis	Std. Error of Kurtosis
IR1	0.933	0.870	−0.814	0.138	−0.052	0.276
IR2	1.084	1.175	−1.522	0.138	3.338	0.276
IR3	1.337	1.787	−1.048	0.138	1.053	0.276
IR4	1.186	1.406	−0.918	0.138	0.594	0.276
IR5	1.213	1.470	−1.131	0.138	1.399	0.276
IR6	0.837	0.701	−0.773	0.138	−0.078	0.276
BOMS1	1.211	1.465	−1.315	0.138	1.720	0.276
BOMS2	1.250	1.563	−0.969	0.138	0.708	0.276
BOMS3	1.231	1.515	−1.341	0.138	2.342	0.276
BOMS4	1.289	1.661	−1.176	0.138	1.470	0.276
EAUS1	1.300	1.690	−1.504	0.138	2.739	0.276
EAUS2	1.247	1.554	−1.179	0.138	1.271	0.276
TPD1	1.081	1.169	−1.475	0.138	2.824	0.276
TPD2	1.201	1.443	−0.925	0.138	0.237	0.276
TPD3	1.300	1.690	−0.920	0.138	0.329	0.276
TPD4	1.285	1.651	−0.949	0.138	0.587	0.276
TPD5	1.210	1.464	−0.890	0.138	0.404	0.276
TPD6	1.262	1.593	−1.042	0.138	0.719	0.276
TPD7	1.254	1.572	−1.532	0.138	2.665	0.276
TPD8	1.342	1.802	−1.256	0.138	1.505	0.276
TPD9	1.159	1.343	−1.175	0.138	1.880	0.276
ODCH1	1.241	1.540	−1.012	0.138	0.599	0.276
ODCH2	1.355	1.837	−0.933	0.138	0.424	0.276
ODCH3	1.277	1.631	−1.189	0.138	1.542	0.276
IS	1.257	1.580	−1.156	0.138	1.341	0.276
GDAWAR1	1.247	#	−1.233	0.138	1.955	0.276
GDAWAR2	1.311	#	−1.032	0.138	1.089	0.276
GDAWAR3	1.238	#	−0.916	0.138	0.822	0.276
GDAWAR4	1.337	#	−1.025	0.138	1.118	0.276
IQ1	1.369	#	−1.373	0.138	1.801	0.276
IQ2	1.222	#	−1.267	0.138	1.611	0.276
IQ3	1.327	#	−1.254	0.138	1.635	0.276
IQ4	1.251	#	−1.205	0.138	1.695	0.276
T1	1.456	#	−1.085	0.138	0.927	0.276
T2	1.462	#	−0.992	0.138	0.522	0.276
T3	1.368	#	−0.881	0.138	0.358	0.276
PBDINX1	1.330	#	−1.206	0.138	1.583	0.276
PBDINX2	1.220	#	−0.902	0.138	0.544	0.276
PBDINX3	1.291	#	−1.132	0.138	1.569	0.276
PBDINX4	1.255	#	−1.109	0.138	1.296	0.276
IIN1	1.139	#	−1.107	0.138	1.840	0.276
IIN2	1.229	#	−1.156	0.138	1.676	0.276
IIN3	1.276	#	−1.061	0.138	1.079	0.276
IJD1	1.274	#	−1.199	0.138	1.387	0.276
PEU1	1.487	#	−1.041	0.138	0.452	0.276
PP	1.408	#	−1.042	0.138	0.673	0.276
PR1	1.319	#	−0.935	0.138	0.617	0.276