Document Type : Research Paper


1 P.h.D Student at Shahid Beheshti University

2 faculty member of shahid beheshti university

3 Faculty member of Shahid Beheshti University


Quantitative information by itself provides investors with an incomplete picture of a
firm’s economic circumstances. Thus firms also provide qualitative and textual
disclosures in addition to quantitative disclosures which have characteristics such as
language sentiment and readability that can have impact on investors’ judgment and
decision-making. The goal of this study is to examine whether language sentiment
and readability of an earning press release can affect investors’ judgment and
whether this effect is conditional on investors’ information processing style
(sophistication). For this purpose a 2 * 2 * 2 between-subject experiment was
conducted with accounting students as participants. ANOVA analysis showed a
significant relationship between investors’ judgment, language sentiment and
readability. Results also indicated that positive language sentiment and low
readability affect less sophisticated investors who use heuristic information
processing style in a positive way and more sophisticated investors who use rational
thinking style in a negative way. Taken together, the results of this study confirm
that there is a need for regulation to ensure protection for unprofessional investors
and also require companies to apply disclosure tone which is in line with firm’s
overall performance and increase the readability of qualitative disclosures


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