The Joint Influence of Information Push and Value Relevance on Investor Judgments and Market Efficiency

• Published date: 01 June 2022
• Author: W. BROOKE ELLIOTT,BRIAN T. GALE,JESSEN L. HOBSON
• Date: 01 June 2022
• DOI: http://doi.org/10.1111/1475-679X.12400

DOI: 10.1111/1475-679X.12400

Journal of Accounting Research

Vol. 60 No. 3 June 2022

Printed in U.S.A.

The Joint Influence of Information

Push and Value Relevance on

Investor Judgments and Market

Efficiency

W. BROOKE ELLIOTT,∗BRIAN T. GALE,†

AND JESSEN L. HOBSON‡

Received 18 November 2019; accepted 7 August 2021

ABSTRACT

We use experimental markets to examine how pushing investment informa-

tion and the value relevance of that information interact to influence in-

vestors’ value estimate accuracy and market price efficiency. Developments

in technology allow information to be pushed to investors anytime and any-

where. However, in addition to value-relevant information, pushed informa-

tion often includes information that is irrelevant for assessing firm value.

Drawing on psychology theory, we find that pushing information has diver-

gent effects depending on the value relevance of the information. Pushing

∗Gies College of Business, University of Illinois at Urbana-Champaign; †Foster School of

Business, University of Washington; ‡Gies College of Business, University of Illinois at Urbana-

Champaign

Accepted by Haresh Sapra. We thank an anonymous reviewer,Rob Bloomfield, Joe Burke,

Nicole Cade, Deni Cikurel, Ed deHaan, Devon Erickson, Fynn Gerken, Estha Gondowijoyo,

Stephanie Grant, Ryan Guggenmos, Vicky Hoffman, Bob Libby, Yi Luo, Rachel Martin, Dawn

Matsumoto, Don Moser,Pamela Murphy, Lynn Rees, Kristi Rennekamp, Steven Salterio, Chad

Simon, Rosh Sinha, Ryan Sommerfeldt, Blake Steenhoven, Brian White, Jeff Williams, anony-

mous reviewers for the 2018 FARS midyear conference, and workshop participants at the 2018

FARS midyear conference, the 2018 Securities and Exchange Commission DERA Symposium,

the 2019 Cornell Financial Reporting Mini-Camp, the 2019 ENEAR Conference, Queen’s Uni-

versity, the University of Illinois, the University of Pittsburgh, Utah State University, and the

University of Washington for their helpful comments.

1049

© 2021 The Chookaszian Accounting Research Center at the University of Chicago Booth School of

Business.

1050 w. b. elliott, b. t. gale, and j. l. hobson

only value-relevant information increases investors’ processing of the infor-

mation and leads to more accurate value estimates and market prices than

when not pushed. In contrast, pushing a mix of value-relevant and value-

irrelevant information reduces investors’ processing of value-relevant infor-

mation, leading to less accurate value estimates and market prices due to

poorer acquisition and integration of information than when not pushed or

when only value-relevant information is pushed. Collectively, our results re-

veal a dark side to push technologies, particularly with the growing presence

of value-irrelevant information.

JEL codes: M41, G11, G14, C91, D83

Keywords: information push; value relevance; information processing;

value estimate accuracy; market price efficiency

1. Introduction

The information environment for investors is evolving dramatically as

a result of new technologies (Miller and Skinner [2015]). In addition

to increasing amounts of disclosure from firms, investors can also ob-

tain investment information from newswires, financial news outlets,

investment research websites, and social media platforms. To navigate

this expanding information environment, millions of investors now have

investment information automatically disseminated (“pushed”) to them

as opposed to retrieving (“pulling”) the information on demand. While

pushed investment information is frequently value-relevant (Blankespoor,

Miller, and White [2014], Chen et al. [2014], Jame et al. [2016]), it increas-

ingly includes other information that may be irrelevant or even misleading

for assessing firm value (Reeves [2015], Financial Industry Regulatory

Authority (FINRA) [2017], Securities and Exchange Commission (SEC)

[2017], Blankespoor et al. [2019]). In this study, we use experimental

markets to examine how pushing investment information and the value

relevance of that information interact to influence the accuracy of investor

value estimates and market price efficiency.

Push technologies can provide important benefits for both investors

and markets. Proponents assert that push technologies can improve the

accessibility of investment information (Healey [2014], Kansal [2015]). Re-

search shows that the broader dissemination of information facilitated by

push technologies reduces information asymmetry and can improve price

discovery (Blankespoor, Miller, and White [2014], Gilbert [2014], Drake,

Thornock, and Twedt [2017]). However, investors are increasingly likely

to also be pushed information that is irrelevant for assessing firm value.

For example, investors following firms on investment research websites

and social media platforms receive both fundamental investment analysis

as well as investment articles containing baseless opinions and inaccurate

assertions (e.g., Drake, Thornock, and Twedt [2017], FINRA [2017], SEC

[2017]). Newswires and news outlets often disseminate value-irrelevant

historical stock return information along with firms’ earnings information

information push and investor judgments 1051

(Blankespoor et al. [2019]). Further, many firms use the same channels to

push both value-relevant financial information and information that is not

relevant for stock valuation to customers and other stakeholders (such as

notifications of regular retail discounts). Exposure to both value-relevant

and value-irrelevant information is particularly pronounced around impor-

tant news events (e.g., earnings announcements, product releases, etc.) as

information sources compete for investors’ attention.

We predict that pushing information will have divergent effects on

investors’ judgments and market outcomes depending on the value rele-

vance of the information. Pushed information appears automatically and

generally outside of investors’ immediate control.1Pushing information

therefore increases the accessibility of the information and could signal

the information’s importance. Thus, pushing information could reduce

processing costs at each of the three sequential steps of information

processing—awareness, acquisition, and integration (Blankespoor et al.

[2019], Blankespoor, deHaan, and Marinovic [2020]). However, the auto-

matic display of information also forces investors to view the information.

Psychology theory indicates that this forced exposure may cause investors

to respond negatively to pushed information by not reading (i.e., not

acquiring) or discounting (i.e., not integrating) the information, reducing

investors’ processing of pushed information, and perhaps other infor-

mation as well (Edwards, Li, and Lee [2002], Miron and Brehm [2006],

Ying, Korneliussen, and Gronhaug [2009]). These negative responses to

forced exposure are particularly likely when the pushed information is not

clearly relevant or informative or there is uncertainty about its relevance

or informativeness (Edwards, Li, and Lee [2002], Ying et al. [2009], Kim

and Sundar [2010], Goodrich, Schiller, and Galletta [2011]). Conversely,

when the pushed information is clearly relevant, these negative responses

are unlikely and pushing information should instead increase investors’

processing. Finally, because market prices tend to reflect investors’ average

beliefs (Hirshleifer and Teoh [2003]), the differential processing of the

value-relevant information is likely to affect market price efficiency in a

similar manner as investors’ value estimates.

We examine our predictions using an experimental market approach,

manipulating two variables in a 2 ×2 between-markets design. Each market

1For some sources of investment information, investors face an initial opt-in decision to

receive pushed information (e.g., choosing to follow a firm, commentator, or analyst or

to receive web, mobile, or email push notifications). For other sources, investors are auto-

matically enrolled and must opt out if they no longer wish to receive pushed information

(Clor-Proell, Guggenmos, and Rennekamp [2020]). Significant numbers of investors opt

in to receive pushed information through email, push notifications, and other alerts (e.g.,

Urban Airship [2015], Accengage [2017], Constant Contact [2018], Seeking Alpha [2019]),

with opt-in rates higher for finance sources than any other industry (Accengage [2018]).

These decisions are relatively sticky since costs (in time and effort) exist to opt out of pushed

information, and unsubscription rates for web push notifications are often relatively low

(PushCrew [2018]).