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Leveling the Playing Field: How Assurance Mitigates the Negative Effect of Unfamiliarity Among Nonprofessional Investors

aFlorida Atlantic University, USA
bNorth Carolina State University, USA

Advances in Accounting Behavioral Research

ISBN: 978-1-80455-799-0, eISBN: 978-1-80455-798-3

Publication date: 13 March 2023


Nonfinancial information is becoming more readily available to investors, and thus, relative to annual financial reports, is having an increasing influence on investors' stock pricing decisions. Using Hogarth and Einhorn's (1992) belief-adjustment model, we examine how task familiarity (high, medium, and low) influences nonprofessional investor stock price decisions when these investors are presented with a stream of both positive and negative nonfinancial news. We find that task familiarity negatively correlates with reaction size for both positive and negative information, which creates arbitrage opportunities for those with more task familiarity. However, we find that assurance mitigates this effect, leveling the playing field for less task-familiar investors in most cases. These findings are important as the volume and variety of information types increase, and as more nonfinancial information enters the marketplace in discrete sound bites (e.g., social media, press releases, daily reports). Findings suggest that assurance is one way to lessen the biases exhibited by investors with less task familiarity. These results enhance our understanding of nonprofessional investor behavior through the lens of belief revision.




We thank Scott Boylan, Bryan Church, Steve Salterio, and the participants at the American Accounting Association Annual and Midwest Regional Meetings for their helpful comments and suggestions. We thank David Hayes, Ronald Daigle, and Douglas Ziegenfuss for their assistance in recruiting study participants. We gratefully acknowledge the financial support from Old Dominion University's Office of Research.


Pinsker, R. and Taylor, E. (2023), "Leveling the Playing Field: How Assurance Mitigates the Negative Effect of Unfamiliarity Among Nonprofessional Investors", Karim, K.E. (Ed.) Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 26), Emerald Publishing Limited, Leeds, pp. 79-101.



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