Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies

Firms are required to communicate uncertainties about their future earnings and cash flows to investors. In this thesis, I conducted a between-participants experiment to examine how investors anticipate firms’ uncertain future outcomes in response to contingency disclosures. I find that, inconsisten...

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Main Author: Xu, Tu
Other Authors: Tan Hun Tong
Format: Theses and Dissertations
Language:English
Published: 2017
Subjects:
Online Access:http://hdl.handle.net/10356/72494
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-724942024-01-12T10:32:26Z Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies Xu, Tu Tan Hun Tong Nanyang Business School DRNTU::Business::Finance::Investments Firms are required to communicate uncertainties about their future earnings and cash flows to investors. In this thesis, I conducted a between-participants experiment to examine how investors anticipate firms’ uncertain future outcomes in response to contingency disclosures. I find that, inconsistent with expected utility theory but consistent with findings from psychology, investors raise a firm’s valuation in response to a gain contingency as if the gain contingency has realized its best possible outcome. At the same time, they lower a firm’s valuation more for a loss contingency than for a realized loss that is essentially the worst possible outcome of the corresponding loss contingency. The effect of anticipation on investors’ valuation judgments is mediated by investors’ uncertainty perceptions. My findings have implications for investors, managers, and regulators. Doctor of Philosophy (NBS) 2017-08-16T07:25:48Z 2017-08-16T07:25:48Z 2017 Thesis Xu, T. (2017). Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies. Doctoral thesis, Nanyang Technological University, Singapore. http://hdl.handle.net/10356/72494 10.32657/10356/72494 en 55 p. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic DRNTU::Business::Finance::Investments
spellingShingle DRNTU::Business::Finance::Investments
Xu, Tu
Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
description Firms are required to communicate uncertainties about their future earnings and cash flows to investors. In this thesis, I conducted a between-participants experiment to examine how investors anticipate firms’ uncertain future outcomes in response to contingency disclosures. I find that, inconsistent with expected utility theory but consistent with findings from psychology, investors raise a firm’s valuation in response to a gain contingency as if the gain contingency has realized its best possible outcome. At the same time, they lower a firm’s valuation more for a loss contingency than for a realized loss that is essentially the worst possible outcome of the corresponding loss contingency. The effect of anticipation on investors’ valuation judgments is mediated by investors’ uncertainty perceptions. My findings have implications for investors, managers, and regulators.
author2 Tan Hun Tong
author_facet Tan Hun Tong
Xu, Tu
format Theses and Dissertations
author Xu, Tu
author_sort Xu, Tu
title Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
title_short Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
title_full Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
title_fullStr Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
title_full_unstemmed Do investors over-anticipate? : Evidence from their reactions to gain and loss contingencies
title_sort do investors over-anticipate? : evidence from their reactions to gain and loss contingencies
publishDate 2017
url http://hdl.handle.net/10356/72494
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