The Joint Influence of Information Push and Value Relevance on Investor Judgments and Market Efficiency

Abstract

We use experimental markets to examine how pushing investment information and the value relevance of that information interact to influence investors’ value estimate accuracy and market price efficiency. Developments in technology allow information to be pushed to investors anytime and anywhere. However, in addition to value‐relevant information, pushed information often includes information that is irrelevant for assessing firm value. Drawing on psychology theory, we find that pushing information has divergent effects depending on the value relevance of the information. Pushing only value‐relevant information increases investors’ processing of the information and leads to more accurate value estimates and market prices than when not pushed. In contrast, pushing a mix of value‐relevant and value‐irrelevant information reduces investors’ processing of value‐relevant information, leading to less accurate value estimates and market prices due to poorer acquisition and integration of information than when not pushed or when only value‐relevant information is pushed. Collectively, our results reveal a dark side to push technologies, particularly with the growing presence of value‐irrelevant information.

Investor relations and investment efficiency

“…Evidence in Column (5) suggests that investment efficiency declines when IROs circulate to board directors' information gathered from meetings with financial media. This result is in line with contemporary work suggesting that, when they receive a mix of value-and nonvalue-relevant information, decision-makers process value-relevant information less capably vis-à-vis decision-makers that receive only value-relevant information (Elliott et al, 2022).…”