Brunswik Lens Model, also referred to as the Lens Model, was developed by Brunswik (1952) and is a model used to describe behavioural research which aims to examine how individuals react to financial reporting and disclosures (Deegan, 2014). In essence, the model depicts the process in which individuals use a number of factors, referred to as cues, to make a judgement (Libby, 1981). Following the downgrade announcement, both potential and existing investors can use the Brunswik Lens Model in order to determine if they would potentially buy or sell shares in JB Hi-Fi. This perspective of whether to buy or sell would be observed through a lens of imperfect cues collectively (Broniarczyk, Hoyer, & McAlister, 1998). Some of the possible cues include; change in dividends per share and earnings per share post announcement (if there has been a decline compared to previous years), cause of the decline in the forecast, …show more content…
In other words, how the information was presented or disclosed), ASX’s response to JB Hi-Fi’s justification on its reporting decision, challenging conditions of the electronics industry in the future and if competitors of JB Hi-Fi have also forecasted downgrades etc. These imperfect cues are used as a basis to aid in decision making and it is argued that none of the cues, either in isolation or combination, could provide the perfect solution and are claimed to be probabilistically related to the event of interest (Trotman, Tan, & Ang, 2011). Different weightings are given to the cues (independent variables) and the decision (dependent variable) (Orquin, 2014). The cues will have different levels of importance (Libby, 1981) for the investors’ judgements. For both potential and existing investors, it is safe to say that the change in dividends as a result of the downgrade is likely to be the most crucial factor in determining if the investor