Stakeholder focus or strategy focus? An eye-tracker study on the effect of presentation format on nonprofessional investors’ information processing patterns

Using eye-tracking technology, we examine whether the information processing patterns of nonprofessional investors with a directional investment preference are affected by performance information presented based on either a focus on stakeholders (stakeholder format) or on strategic goals (strategic theme format). We find that when a company’s financial performance has declined but nonfinancial performance has improved, a strategic theme (stakeholder) format causes investors in a long investment position to focus on negative financial information to a lesser (greater) extent than those in a short investment position. These results indicate that a strategic theme format encourages biased investors to draw on favorable nonfinancial information to support their position, whereas a stakeholder format causes them to closely scrutinize unfavorable financial information. We also find that the level of bias in investors’ earnings forecasts is lower when information is presented in a strategic theme format than in a stakeholder format; however, a supplementary experiment finds that this result is reversed when a company’s financial performance has improved but its nonfinancial performance has declined. Our results have implications for external report preparers, standard setters, and analysts.