Online Business Reporting: A Signaling Theory Perspective

Abstract

ABSTRACT The reporting of business information on websites, hereafter referred to as electronic business reporting (e-BR), continues to gain widespread acceptance as the Internet provides an inexpensive channel for delivering timely financial and nonfinancial information to investors. The online environment facilitates both the delivery of traditional text-based reporting content and the use of enhanced multimedia for displaying nonfinancial content, including elements such as images, presentations, video, and social media features. Signaling theory and research on trust was applied to develop a signaling research model and investigate how the reporting of nonfinancial content in e-BR can serve as a signal, specifically with nonprofessional investors. An experimental study was conducted in which the quality of e-BR and company performance was varied to investigate how e-BR influences perceptions of investment quality and intentions. The findings suggest that the nonfinancial content in e-BR influences perceptions of trustworthiness and perceived investment quality. When financial performance is low, high-quality e-BR enhances investors' perceptions of investment quality, which in return influences investment intentions.