Can a Deliberative Mindset Prompt Reduce Investors’ Reliance on Fake News?

Moderating Effect of Error Source on the Continued Influence of Retracted Disclosure on Individual Investors’ Judgements

“…Grant et al . (2019), in an accounting study, prompted participants in the role of investors to be in a deliberative mindset by considering the pros and cons of a personal issue 1 . This intervention before exposure to misinformation helps moderate the continued influence effect.…”

“…Disclosure can include self‐disclosure by firms and external disclosures about the firm by information intermediaries such as the financial press (Healy and Palepu, 2001). Corrections to firm disclosures are a common occurrence (Tan and Tan, 2009; Grant et al ., 2019), compounded by the recent increase of fake news, which has drawn concerns from regulators (SEC, 2015; AICPA, 2017). Psychology research documents the continued influence of information subsequently revealed to be false (e.g., Johnson and Seifert, 1994; Lewandowsky et al ., 2012).…”

“…Psychology research documents the continued influence of information subsequently revealed to be false (e.g., Johnson and Seifert, 1994; Lewandowsky et al ., 2012). Recent accounting studies have shown that the continued influence effect also applies to auditing (Tan and Tan, 2008) and investment settings (Tan and Tan, 2009; Tan and Koonce, 2011; Grant et al ., 2019). Regulators (e.g., SEC, 2015) and accounting researchers (e.g., Tan and Tan, 2009) have raised the need for individual investors to be vigilant about the quality of information provided by external organizations, such as investment portals and news sites.…”

“…An accounting study by Grant et al . (2019) finds that investors prompted to be deliberative by considering the pros and cons of a personal issue before exposure to the misinformation may moderate the continued influence effect. These scepticism interventions, including the issue of warnings and inducement of a deliberative mindset, occur before exposure to the misinformation.…”

“…Hence, the investment setting is ideal for testing Green and Donahue's (2011) theory that scepticism experienced solely after exposure to misinformation may effectively mitigate the continued influence effect. This study hypothesizes that an error originating from the disclosure company (i.e., management) triggers a higher level of scepticism from investors than from the press, given the prevalence of press corrections (Tan and Tan, 2009; Grant et al ., 2019). Consequently, a retraction from press error is less likely to cause a revision of the earlier beliefs, amplifying their continued influence.…”