A behavioral approach to voluntary change and innovation in external financial reporting: A case study of the restructuring of the Annual Report on Form 20-F and the Financial Report

46 Pages Posted: 28 May 2021

See all articles by Dirk Otto Beerbaum

Dirk Otto Beerbaum

Frankfurt School of Finance & Management; Aalto University - Department of Accounting and Finance; Aalto University - School of Business

David Derichs

Aalto University

Julia M. Puaschunder

Columbia University; New School for Social Research; Harvard University; The Situationist Project on Law and Mind Sciences

Seppo Ikaheimo

Aalto University - Department of Accounting and Finance; Aalto University

Date Written: December 01, 2020

Abstract

The accounting literature contains a large quantity of studies about mandatory regulatory- enforced changes in external financial reporting, however very few studies explore the underlying behavior and the internal decision management process of companies when substantial change and innovation in their external financial reporting is observed despite non-existence of new regulatory requirements. Due to the absence in the literature to provide explanatory reasons, the existing terms such as “voluntary” have difficulties in explaining such behavior. ‘Voluntary’ implies providing additional information to the investor with the aim to increase transparency and reduce information asymmetries between management and investor. Applying this to the initiation of reducing information appears as a phenomenon. We apply a behavioral economic approach to explain triggers – but also obstacles – for initiating change, which is not regulatory enforced. Considering interviews with company representatives and external auditors as well as archival data, our detailed analysis considering the model of institutional entrepreneurship reveals that organizational changes and individual levels strongly influenced the change project under study. A strong culture of applying management tools such as benchmarking, peer’s analysis and innovation to financial and non-financial reporting seems to have provided a fertile ground for academically-trained accounting executives constantly challenging effectiveness.

Suggested Citation

Beerbaum Dr., Dirk Otto and Derichs, David and Puaschunder, Julia M. and Ikaheimo, Seppo and Ikaheimo, Seppo, A behavioral approach to voluntary change and innovation in external financial reporting: A case study of the restructuring of the Annual Report on Form 20-F and the Financial Report (December 01, 2020). Available at SSRN: https://ssrn.com/abstract=3855089 or http://dx.doi.org/10.2139/ssrn.3855089

Dirk Otto Beerbaum Dr. (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Aalto University - Department of Accounting and Finance ( email )

P.O. Box 1210
Helsinki, 00100
Finland

Aalto University - School of Business ( email )

Finland

David Derichs

Aalto University ( email )

Ekonominaukio 1
Espoo, 02150
Finland

Julia M. Puaschunder

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

Harvard University ( email )

24 Oxford Street
Cambridge, MA 02138
United States

The Situationist Project on Law and Mind Sciences ( email )

24 Oxford Street
Cambridge, MA 02138
United States

Seppo Ikaheimo

Aalto University - Department of Accounting and Finance ( email )

P.O. Box 21210
Aalto, 00076
Finland
+ 358 50 505 4990 (Phone)
+ 358 9 43 138 678 (Fax)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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