Does Search-Facilitating Technology Improve the Transparency of Financial Reporting?

Posted: 30 Jun 2003

See all articles by Frank D. Hodge

Frank D. Hodge

University of Washington - Michael G. Foster School of Business

S. Jane Kennedy Jollineau

University of San Diego - School of Business; University of San Diego - Department of Accountancy; University of Washington - Foster School of Business

Laureen A. Maines

Indiana University - Kelley School of Business - Department of Accounting; PricewaterhouseCoopers

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

XBRL (Extensible Business Reporting Language) is an emerging technology that facilitates directed searches and simultaneous presentation of related financial statement and footnote information. We investigate whether using an XBRL-enhanced search engine helps nonprofessional financial statement users acquire and integrate related financial information when making an investment decision. We conduct our investigation in the context of recognition versus disclosure of stock option compensation. Our results reveal that many users do not access the technology, but those that do use it are better able to acquire and integrate information. Specifically, we find that when stock option accounting varies between firms, the use of an XBRL-enhanced search engine increases the likelihood that individuals acquire information about stock option compensation disclosed in the footnotes. We also find that XBRL helps individuals integrate the implications of this information, resulting in different investment decisions between individuals who use and do not use the search engine. Our results suggest that search-facilitating technologies, such as XBRL, aid financial statement users by improving the transparency of firms' financial statement information and managers' choices for reporting that information. Our results also reveal that wide publicity about the benefits of using search-facilitating technology may be needed to induce financial statement users to access the technology.

Keywords: recognition, disclosure, transparency, XBRL

JEL Classification: D82, M41, M45, O30

Suggested Citation

Hodge, Frank Douglas and Kennedy Jollineau, S. Jane and Maines, Laureen A., Does Search-Facilitating Technology Improve the Transparency of Financial Reporting? (June 2003). Available at SSRN: https://ssrn.com/abstract=415440

Frank Douglas Hodge (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Paccar Hall 540, Box 353200
Seattle, WA 98195-3200
United States
206-616-8598 (Phone)
206-685-9392 (Fax)

S. Jane Kennedy Jollineau

University of San Diego - School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
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University of San Diego - Department of Accountancy ( email )

223 Olin Hall
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San Diego, CA
United States

HOME PAGE: http://https://www.sandiego.edu/business/directory/biography.php?_focus=1238

University of Washington - Foster School of Business ( email )

Seattle, WA 98195-3226
United States
206-543-4368 (Phone)
206-685-9392 (Fax)

Laureen A. Maines

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2611 (Phone)
812-855-4985 (Fax)

PricewaterhouseCoopers

1301 Avenue of the Americas
New York, NY 10019
United States

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