Stock Investors’ Accounting Information Choice and Processing:

Implications from Empirical Research of Japan and the US

Abstract

This paper reviews empirical studies in Japan and the US on stock investors’ accounting information choice and information processing. Assuming limited information processing capacity, I first examine how investors choose high-value information and prioritize information processing. I then analyze the effects on corporate stock price formation. Finally, I review empirical results on firm’s strategic disclosure and management behaviors exploiting investors’ information choice and processing decisions. This paper aims to illustrate that when studying effects of accounting information on the security market and corporate behaviors, it is important to consider the fact that investors with limited capacity choose to process only some but not all available information.