Does Coordinated Presentation Help Credit Analysts Identify Firm Characteristics?
Robert J. Bloomfield
Cornell University - Samuel Curtis Johnson Graduate School of Management
Frank D. Hodge
University of Washington - Michael G. Foster School of Business
Patrick E. Hopkins
Kristina M. Rennekamp
University of Illinois at Urbana-Champaign - Department of Accountancy
July 26, 2010
Johnson School Research Paper Series No. 14-2011
We present 60 experienced credit analysts with financial information for two firms: one that mainly outsources production and one that does not. We find that analysts are better able to identify firm characteristics that make an outsourcer more creditworthy when those characteristics are presented in the same general section of a financial report; either on the face of the financial statements or in the footnotes. Such coordinated presentation reduces the cognitive load necessary for integrating the related information and forming a meaningful mental model of each firm. Our results suggest that if standard setters are going to require more detailed disclosures, coordinated presentation of related decision-useful information in the same section of a firm’s financial report may benefit users, regardless of whether the information is recognized on the face of the financial statements or disclosed in the notes. Supplemental analysis cautions standard setters, however, to consider whether requiring more detailed disclosures provides an incremental benefit over how firm’s disclose information today.
Number of Pages in PDF File: 38
Keywords: Financial statement presentation, classification, disaggregation, transparency, proximity, experiment, standard setting
JEL Classification: C91, G12, G18, M41, M44working papers series
Date posted: July 29, 2010 ; Last revised: September 13, 2013
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