Abstract:
This study provides experimental evidence regardi ng t he
existence of order effects related to the presentat ion of
positi ve and negative qualitative information in annual
reports . Specifically, the eff ect of information order in
the Directors ' Report is examined. The Directors' Report in
an annual report is an important vehicle for management to
persuade investors that the company is a wo r t hwhile
investment . Prior studies have shown both that managements
manipulate information in Directors ' Report and that
investors use the information in Directors ' Report in
making investment decisions . Such usage has potential
ramifications for corporate management and investors . This
study e xtends prior research by examining whether the
ordering of good news and bad news in a Directors ' Report
could bia s investor perceptions .
A hypothetical directors ' report was constructed utiliz i ng
positive and negative pieces of information obtained f rom
several actual directors ' report in annual reports . Two
versions of the letter were constructed , both incl uding the
same statements , but with the ordering of the pos i tive and
negative components varied . The first version , hereafter
termed "positive," included all the positive information
about the company first , followed by the negati ve
information . The second version , hereafter termed
"negative , " included all the negative information fi r s t ,
followed by the positive information .
This study was taken on the investors and brokers in
Islamabad stock exchange . The reason behind this is that
the people (Brokers and investors) sitting in the stock
exchange are more experienced and can judge I predict the
information given in directors ' report in more better way
than the university students who do not have any practical
exposure . The results indicate a primacy effect did not
occur .
