Inconsistency across short-term and long-term oriented signals: Effect on investor reactions
研究了当企业同时发出短期负面情绪和长期研发投资等不一致信号时，投资者因认知失调而做出风险规避决策，导致市场负面反应。
• Investors interpret signals holistically due to market information asymmetry. • Temporal incongruence in signals challenges the assumption of same-dimension inconsistency. • Inconsistent signals with different temporal orientations create ambiguity. • R&D investment as a long-term signal conflicts with negative sentiment as a short-term signal. • Cognitive dissonance leads investors to make risk-averse decisions amid signal inconsistency. We examine how investors evaluate firms when they receive inconsistent signals with different temporal orientations—short-term signals about the firm’s status quo versus long-term signals about its prospects. We propose that shareholders react negatively to increased long-term investments, like R&D, when managers express negative sentiments about the firm’s current status. Drawing on signaling and cognitive dissonance theories, we argue that these inconsistent signals cause cognitive dissonance for investors, leading to risk-averse decisions. Analyzing public firms in China from 2008 to 2020, we find that higher R&D intensity amplifies the negative impact of management’s negative sentiment on market reaction. This effect is stronger with higher transient institutional ownership and lower managerial ownership. By focusing on signal inconsistency across different temporal frames, this study aims to better understand how investors evaluate a firm’s long-term investments in light of managers’ sentiments about the current state.