How much is enough? An investigation of nonprofessional investors information search and stopping rule use

Regulators are concerned that the information overload in the current Internet-based disclosure environment may cause investors to overlook important information. To gain a better understanding of the information set gathered by investors, this study incorporates theories from information systems research to examine the cognitive stopping rules used by investors to terminate information search. We survey nonprofessional investors to gain insight into what information they gather and when they determine they have enough information to stop searching and make an investment decision. Demographic analysis shows that investor characteristics are associated with the particular stopping rule used. In addition, results show that the stopping rule used affects the amount and type of information gathered. We find that, in general, investors include very little financial information in their search, and the amount gathered depends on the stopping rule employed. Our results call into question the decision usefulness of accounting information for nonprofessional investors and should be of interest to accounting information systems researchers, regulators, and accounting practitioners.