Text versus Video Disclosure of Forward-Looking Information: The Effect of Non-Verbal Cues on Investors' Judgments

Abstract

We conduct two experiments to examine how investors react to nonverbal cues of certainty as displayed by a CEO communicating forward-looking information via the relatively new and emerging medium of video. Results of the first experiment suggest that, at least for the setting we examine, investors react more negatively (do not react more positively) to a video disclosure when the CEO displays nonverbal cues of uncertainty (certainty), relative to the same disclosure delivered via audio or written text. A second experiment reveals that the lack of a positive reaction to the certain CEO in the video may be due to investors’ belief that the CEO has incentives to convey certainty via nonverbal cues. Indeed, even a subsequent good-news realization—which should add credibility to the CEO’s certainty cues—does not change this perception. Our study has implications for firms considering video as a medium for disclosure.