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    Overview of JIS paper: The effects of information...
    blog entry posted March 9, 2016 by Roger S Debreceny, tagged research 
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    title:
    Overview of JIS paper: The effects of information disaggregation and financial statement interactivity on judgments and decisions of nonprofessional investors
    intro text:

    A new paper by Andrea Kelton, (Wake Forest University) and Murthy (University of South Florida) is The effects of information disaggregation and financial statement interactivity on judgments and decisions of nonprofessional investors. Andrea has provided this blog post on their paper.

     

    Andrea Kelton

    Andrea Kelton

    Uday Murthy

    Uday Murthy

    body:

     

     

    Information technologies enable firms to not only report more frequently, but to also enhance the decision-usefulness of financial information through variations in presentation format. We investigate whether the provision of financial statement interactivity via a web-based drilldown mechanism improves investors’ use of disaggregated financial statement information and, ultimately, their decisions. We suggest that a drilldown mechanism will mitigate the negative effects of information overload caused by disaggregation by allowing users to control their viewing of the disaggregation, focus their attentions on the relevant details, and avoid tendencies towards earnings fixation. However, we expect this load minimizing effect to depend upon the utility (i.e., relevance) of the disaggregated details to the investment task.

                We conduct an experiment with nonprofessional investor participants obtained from Amazon Mechanical Turk to investigate these issues. Participants completed a simple decision case wherein they reviewed either high utility or low utility disaggregated financial statements either with or without the drilldown mechanism. Overall, our results show that participants using the drilldown experienced lower cognitive load and were less susceptible to earnings fixation than those without the drilldown capability. However, when the disaggregated details provided limited new information, the use of the drilldown resulted in higher levels of cognitive load as compared to when the disaggregation provides new information.

                Our results should inform standard setters currently considering enhanced financial statement disaggregation. We provide evidence regarding the conditions when disaggregation is helpful versus harmful to investor decision making and the benefits and costs of financial statement interactivity.