We use semi-structured interviews with public company tax executives and archival data to provide new evidence on how tax executives shape the tax footnote in response to their belief that federal, foreign, and state tax authorities use public disclosures in their enforcement efforts. Interviewees express a desire for vague disclosures that nonetheless comply with applicable disclosure mandates. Using a validated measure of "vagueness," we provide corroborating large-sample evidence that the vagueness of tax footnotes is increasing in tax-based proprietary costs. Additionally, some interviewees convey their belief that vague tax footnotes do not harm investors. We test this conjecture by examining the association between the vagueness of tax footnotes and analyst tax forecast errors. We find only modest evidence that analyst forecast errors are increasing in the vagueness of the tax footnote. However, there are frictions to issuing vague disclosures as we find a positive relation between the vagueness of the tax footnote and the likelihood of receiving an SEC tax comment letter. Our study extends the literature by documenting one way that managers alter tax disclosures in response to tax-based proprietary costs and how this behavior affects stakeholders.

Many CEOs engage in activism by publicly expressing their views on social, environmental, and political issues, while other CEOs refrain from doing so-a behavior we term CEO inactivism. We use two experiments to examine how CEO (in)activism impacts investor decisions. Our results are consistent with our theoretical predictions. When a CEO expresses an activist position that is consistent versus inconsistent with investors' views, investors invest more in the CEO's firm because they perceive the CEO more positively. We also find that CEO inactivism can lead to investment decisions that are as favorable as when the CEO expresses a position consistent with investors' views; our process evidence suggests that this may occur because CEO inactivism increases the likelihood that investors believe the CEO shares their position on a social issue. Finally, we do not find evidence that investor decisions are influenced by whether CEO (in)activism is in response to an external prompt. This study contributes to the emerging literature on CEO activism, a unique form of voluntary disclosure, by providing evidence about how CEO (in)activism influences investors. We also contribute to the literature examining the impact of social media disclosure on investor decisions. Finally, our findings have practical implications for CEOs, who increasingly face external pressures to engage in activism.

We use a set of experiments to examine how a company's choice of assurance level (reasonable versus limited) affects nonprofessional investor confidence in sustainability information disclosed under two different reporting approaches (investor-oriented and broad-stakeholder) and how these choices contribute to investor-auditor expectation gaps. We find that nonprofessional investors distinguish limited from reasonable assurance, regardless of reporting approach. However, when we compare investor to auditor confidence, results reveal significant expectation gaps with limited but not reasonable assurance, suggesting investors fail to sufficiently adjust for the lower level of assurance that a limited-assurance engagement provides. These results are not sensitive to reporting approach. Our findings have implications for future research on ESG assurance, audit firms as they seek to expand their assurance services on sustainability disclosures, and policy makers around the world as they consider whether to mandate assurance over sustainability disclosures and, if so, at what level.

As coined by the SEC, Digital Engagement Practices (DEPs) are visual cues and design features to engage investors on mobile trading platforms. With the rise of mobile stock trading, regulators and other capital market participants are concerned that these DEPs may cause retail investors to trade in ways they otherwise would not. Using an experiment, we examine the impact of two common DEPs in mobile trading platforms—color (i.e., the use of green or red to indicate performance) and allowing investors to swipe versus click and confirm to execute trades. Drawing from prior research, we predict that the color associated with firm information will interact with how investors execute their trades to affect investment decisions. Consistent with expectations, results show that investors make the largest investment in a firm when they swipe to trade and firm information is colored green, relative to when they click and confirm to trade or firm information is colored red, holding firm economics constant. Swiping to trade causes investors to focus relatively more on the upside of investing, but only when firm information is colored green and not when it is colored red. The color red leads to a muted effect of swiping to trade as investors experience more negative affect and focus relatively more on the downside of investing. Our study answers calls from regulators and academics to examine the effects of technology on information evaluation in investment decisions, and has important practical implications for investors. This paper was accepted by Ranjani Krishnan, accounting. Supplemental Material: The data is available at https://doi.org/10.1287/mnsc.2023.00379 .

We examine the effect of humanizing (naming) robo-advisors on investor judgments, which has taken on increased importance as robo-advisors have become increasingly common and there is currently little SEC regulation governing key aspects of their use. In our first experiment, we predict and find that investors are more likely to rely on the investment recommendation of an unnamed robo-advisor, whereas they are more likely to rely on the investment recommendation of a named human advisor. Theory suggests one reason that naming a robo-advisor may have drawbacks pertains to the complexity of the task the robo-advisor performs. We explore the importance of task complexity in our second experiment. We predict and find that investors are less likely to rely on a named robo-advisor when the advisor is perceived to be performing a relatively complex task, consistent with our first experiment, and more likely to rely on a named robo-advisor when the advisor is perceived to be performing a relatively simple task, consistent with prior research on human-computer interactions. Our findings contribute to the literature examining how technology influences the acquisition and use of financial information and the general literature on human-computer interactions. Our study also addresses a call by the SEC to learn more about robo-advisors. Lastly, our study has practical implications for wealth management firms by demonstrating the potentially negative effects of making robo-advisors more humanlike in an attempt to engage and attract users.

While many CEOs are increasingly engaging in activism by publicly expressing their views onsocial, environmental, and political issues, other CEOs have refrained from doing so—a behaviorwe refer to as CEO inactivism. Using an experiment, we offer evidence on how CEO (in)activismimpacts investor decisions. Consistent with our theoretical predictions, we predict and find thatrelative to when a CEO expresses a social position inconsistent with investor position, investmentdecisions are more favorable when the CEO expresses a position consistent with investor positionor when the CEO does not express a position (i.e., inactivism). Additionally, CEO inactivism leadsto similar investment decisions as when the CEO expresses a position consistent with investorposition. Results also reveal that whether CEO (in)activism is prompted or unprompted does notappear to impact investor decisions. Process evidence supports our theory and helps explain theseresults. First, we find that CEO activism causes participants to focus more on the CEO and theCEO's position and less on the firm's financial performance. Second, CEO inactivism results inparticipants being more likely to project their own views onto the CEO and think that the CEOholds the same views as them. Finally, we find evidence suggesting that investors endorse theCEO's (in)activism more when the CEO either expresses a position consistent with their own ordoes not express a position. Our study contributes to the emerging literature on CEO activism, aunique form of voluntary disclosure, by providing causal evidence of (in)activism. We alsocontribute to the literature examining the impact of social media disclosure on investor decisions.Finally, our findings have practical implications for CEOs who are increasingly called on topublicly express stances on social controversies.

We examine if investor expectations of two common disclosure mediums (conference calls and Twitter) interact with a CEO's communication style to influence investor judgments. Consistent with theory, results show that when the disclosure medium is a conference call, investors are less willing to invest when the CEO is modest about positive firm performance compared to when the CEO brags. In contrast, when the disclosure medium is Twitter, investors are less willing to invest when the CEO brags about positive firm performance compared to when the CEO is modest. Further analysis reveals that perceived CEO credibility mediates the influence of a CEO's communication style and disclosure medium on investor judgments. Additionally, we find that regardless of the disclosure medium, investors are less willing to invest in a firm when the CEO humblebrags about positive firm performance relative to when he brags or is modest. Our study contributes to the emerging literature on social media and disclosures, and to the literature investigating how style features of disclosures influence investor judgments. Our results also have practical implications for firms and managers developing communication strategies for new disclosure mediums like Twitter.