The Effects of Information Disaggregation and Financial Statement Interactivity on Judgments and Decisions of Nonprofessional Investors
- Resource Type
- Authors
- Uday S. Murthy; Andrea Seaton Kelton
- Source
- Journal of Information Systems. 30:99-118
- Subject
- 050208 finance
Information Systems and Management
Actuarial science
Earnings
business.industry
05 social sciences
Control (management)
Accounting research
Accounting
050201 accounting
Information overload
Management Information Systems
Human-Computer Interaction
Interactivity
Management of Technology and Innovation
0502 economics and business
The Internet
Business
Software
Financial statement
Cognitive load
Information Systems
- Language
- ISSN
- 1558-7959
0888-7985
Despite recent advances in Internet reporting technologies and calls for the increased reporting of disaggregated financial information, extant accounting research has not examined the potential positive and negative effects of providing disaggregated information using interactive web-based financial statements. In an experiment with nonprofessional investors, we investigate whether an Internet technology that provides investors control over the viewing of disaggregated financial information improves investment-related judgments and decisions and whether such effects depend on the utility of the disaggregation. In support of the notion that interactivity mitigates information overload, we find some evidence that the use of the drilldown capability is associated with a decrease in investors' perceived cognitive load. Results also show that investors using a drilldown capability are less susceptible to earnings fixation compared to investors viewing the disaggregation without the drilldown feature. However, we also find that in some circumstances financial statement disaggregation may not be beneficial to investors and that the resultant increase in cognitive load may outweigh any benefits of financial statement interactivity. These results have important and timely implications for standard setters considering whether to require increased disaggregation in financial statement reporting and companies seeking to enhance the usefulness of their web-based financial reports. JEL Classifications: C91; G11; G18; M41. Data Availability: Contact the authors.