Document Type
Article
Publication Date
3-1-2009
Abstract
Calls for the reformation of financial reporting have exacerbated in recent years in light of a rapidly changing global investment climate and in the wake of a battered financial system. This study explored the interrelationships between informational complexity, transparency and stewardship on the usefulness of financial reporting. Empirical analyses was based on a survey of more than 650 executives to test hypotheses that informational complexity impairs judgment through decision-makers' strategy selection; that transparency captures the timeliness, interpretation, and dissemination of financial reporting that leads to a more informed market; and that there is a stewardship demand to report on the control and use of resources by those accountable for their control and use. The most interesting finding of this study was the lack of support for the connection between complexity, transparency and value relevance, even though prior research has found strong support for a relationship between these three constructs. However, it is clear that although considerable complexity can originate from the intricacy of commercial transactions and events themselves. The accounting for such transactions, by their very nature is complicated and is therefore beyond the control of standard setters. It is therefore imperative that we acknowledge and distinguish between two types of complexity in financial reporting, from the outset: that which is inescapable, due to the inherent complexity of certain transactions, and that which could be avoidable, having been brought about by accounting standards themselves. Additionally, the impact of regulatory trust on decision usefulness was found to be significant, but negative. Can it be postulated that rapid changes in the economy, inadequacy of accounting regulation and other institutions creates a negative effect on the usefulness of accounting information?
Keywords
accounting--research, informational complexity, transparency, regulatory trust, stewardship, value relevance, decision usefulness
Rights
© The Author(s). Kelvin Smith Library provides access for non-commercial, personal, or research use only. All other use, including but not limited to commercial or scholarly reproductions, redistribution, publication or transmission, whether by electronic means or otherwise, without prior written permission is strictly prohibited.
Department/Center
Design & Innovation
Recommended Citation
Brearey, Chester H., "A Study of the Impact of Informational Complexity, Transparency and Stewardship on Decision Usefulness: The Users' Perspective" (2009). Student Scholarship. 63.
https://commons.case.edu/studentworks/63