35th Annual Student Research Conference
Financial Accounting: An Examination of the Casual Investor
Christian Marzo
Dr. Michael V. Barnes, Faculty Mentor
Many studies have detailed the relationship between accounting changes intended to increase corporate earnings, the relationship between higher corporate earnings and the consequent rise in shareholder prices, and the difference in the reactions between unsophisticated and sophisticated investors. However, since the publishing of these studies, the investing landscape has changed significantly with commission-free trading apps such as Robinhood coming into prominence. This study seeks to determine whether this new generation of investors, henceforth referred to as “casual investors,” more closely emulates sophisticated or unsophisticated investors. We investigate whether a sample of investors are able to identify a depreciation-based accounting change intended to solely boost accounting profits. Prior research suggests that such manipulation may deceive unsophisticated investors but rarely influences sophisticated investors’ perception of the company. This study may help to determine where modern-day investors who utilize commission-free trading apps (such as Robinhood) fall along this spectrum.
Keywords: Casual investor, Sophisticated investor, Unsophisticated investor, Retail investor, Robinhood, Accounting-based depreciation, Straight-line depreciation, Double-declining method of depreciation
Topic(s):Accounting
Presentation Type: Oral Presentation
Session: 303-5
Location: SUB GEO B
Time: 2:15