| Abstract: |
Since the start of the 21st century, the world has seen a significant
proliferation of openly available information. While drastic increases in the
availability of information have been observed in all areas of everyday life,
they are particularly pronounced in financial markets. In parallel,
technological evolution and novel methods of data analysis have significantly
altered how information is analyzed and incorporated by investors. Despite its
merits for market efficiency and price discovery, this development entails a
significant risk of increased information asymmetries due to a higher
disparity between sophisticated investors who are able to make use of such
technology and those investors who are not. Research has further shown that
investors, when provided with too much information at once, are not able to
fully comprehend and incorporate all information leading to irrational
investment behavior. It is hence of particular importance to fully understand
how information is provided, processed, and incorporated in financial markets.
While there already exists a growing literature on biased decision-making and
information processing in financial markets, research gaps remain. Questions
that are, so far, still unanswered in most contexts are, for example: Does the
increasing access to information enable sophisticated institutional investors
to correctly assess and seize behavioral biases of executives? Are retail
investors able to correctly interpret (and potentially devalue) information
signals provided by irrational executives? How do investors behave in times of
crises and concomitant information overload? Do investors also incorporate the
informational quality of public disclosures (and not only its information
content) when assessing a firm’s prospects and risks? Do executives anticipate
these market reactions and potentially strategically manipulate information
signals to provoke market reactions for the firm’s or their own benefit? By
conducting four disjunct empirical research studies of which each constitutes
one chapter of this dissertation, I hope to close some of these research gaps.
More precisely, in the first two chapters, I shed light on whether and how
investors react to information signals provided by overconfident executives
(Chapter 2) and how information of such executives is perceived in times of
crises (Chapter 3). These studies are then further complemented by an analysis
of how investors in particularly emotionally charged stocks react to different
events in times of particularly high information overflow (e.g., during a
crisis) in Chapter 4. Finally, an analysis of whether investors also
incorporate measures of informational quality and not only the information
itself in their investment decisions and whether executives anticipate and
strategically manage investor reactions to certain disclosures concludes in
Chapter 5. |