The Effect of Impression Management Strategies On Earnings Release Announcements

Abstract

This study examines the effect of impression management on the reactions of
individual decision-makers in the presence of positive or negative information.
In a stock price prediction task void of impression management, inexperienced
investors had a more pessimistic expectation for the future stock price when
unfavorable financial results were presented than when favorable financial
results were presented or when investment experience was present. Predictions
were also consistent with the theory of diminishing marginal sensitivity. Impression
management in the form of management commentary significantly shifted
stock price expectations in the loss domain but did not affect reactions in the
domain of gains. The results were consistent across prior investment experience
for both the reaction to diminishing marginal sensitivity and impression management.