The “Incomplete Revelation Hypothesis” and Financial Reporting

Bloomfield, Robert J.

doi:10.2308/acch.2002.16.3.233

Cited by 534 publications

(317 citation statements)

References 19 publications

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“…3;2017 Empirically, many studies have focused on readability in the private sector. Some authors have assessed the main factors that provide higher or lower readability (Schrand & Walther, 2000;Bloomfield, 2002;Li, 2008), others have investigated its main effects (Lehavy et al 2011;Bozanic & Thevenot 2014), and still others have analyzed this level based on ad hoc information during special events (Flory et.al 1992;Courtis, 1995;Lehavy et al 2011;Loughran & McDonald, 2014). Chavkin (1997) examined the level of complexity of corporate texts (financial statements and other documents) with reference to two critical features, as follows: the difficulty of the words (a difficult word is a "technical" word) and the length of sentences.…”

Section: From Accountability To Readability In Italymentioning

confidence: 99%

“…The issue of readability has been widely discussed in literature concerning the private sector (e.g., Dale & Chall, 1949;Smith & Smith, 1971;Barnett & Leoffer, 1979;Smith & Taffler, 1992;Shrand & Walter, 2000;Bloomfield, 2002;Courtis, 1995;Li, 2008). However, to the best of our knowledge, no empirical research has been carried out in the public sector.…”

Section: Introductionmentioning

confidence: 99%

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From Accountability to Readability in the Public Sector: Evidence from Italian Universities

Allini¹,

Ferri²,

Maffei³

et al. 2017

IJBM

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This paper aims to explore the readability of the disclosure provided by Italian universities that changed their accounting systems to accrual accounting over the past three years. The transition from cash to accrual accounting not only concerns financial statements, but also the related notes. Indeed, the Italian government has paid great attention to the narrative sections of reports due to their capacity to provide more transparency. To provide better accountability, financial statements must be readable for all stakeholders. We used two different indexes, namely the Gunning fog and GULPEase indexes. The analysis was conducted on a sample of universities to analyze the narrative sections of the first financial statements prepared according to the new accounting system in 2012-2014. The final sample comprised 32 Italian universities. The research results demonstrated low readability in the balance sheets of Italian universities after switching to accrual accounting, illustrating an unsatisfactory level of accountability.

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Section: From Accountability To Readability In Italymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

From Accountability to Readability in the Public Sector: Evidence from Italian Universities

Allini¹,

Ferri²,

Maffei³

et al. 2017

IJBM

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“…But previous experimental and empirical evidence is inconsistent with the EMH. The "Incomplete Revelation Hypothesis" (IRH) (Bloomfield, 2002) is the alternative theory. It argues that the irrationality of investors is ubiquitous, and the usefulness of accounting information is limited by the transparency of financial reports, the cost of obtaining information and the cognitive ability of investors.…”

Section: Research Hypothesismentioning

confidence: 99%

Presentation Pattern and the Value Relevance of Comprehensive Income --- Evidence from China

Xu¹,

Qi²

2017

IJEF

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In 2006 the Chinese Ministry of finance(CMF) issued new accounting standards that required companies began to present comprehensive income information in the statement of equity. In 2009 and 2014, CMF changed the comprehensive income presentation pattern consecutively twice, from the equity statement pattern to the performance statement transition pattern, and then to the single performance statement. The purpose of these changes is to harmonize China Accounting Standard (CAS) with International Financial Reporting Standards(IFRS). It also aims to enhance the usefulness of comprehensive income information by improving the transparency of information disclosure. From the perspective of presentation patterns, the paper examines the influence of presentation pattern changes on the value relevance of comprehensive income (CI), and on other comprehensive income (OCI). The results show that, under the equity statement pattern, neither CI nor OCI was correlated with value. Under the performance statement transition pattern, both CI and OCI have the value relevance. Under the single performance statement pattern, the CI has higher value relevance, while the OCI does not reflect higher value relevance. This study reveals the impact of comprehensive income presentation pattern on the usefulness of decision making. It has certain inspiration and reference for improving the quality of accounting standards and financial reporting.

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“…Prior research on discretionary corporate disclosure finds that company managers are more forthcoming in making disclosures when their companies are performing well (Schrand & Walther 2000), but they underplay or ignore negative information In contrast, the 'management obfuscation hypothesis' proposes that managers strategically increase the processing cost of adverse information in order to reduce or delay its incorporation into stock price, because market reaction may be delayed or muted by the difficulty of extracting and understanding information contained in complicated disclosure (Bloomfield 2002). That is, managers make negative information more complex and difficult to understand.…”

Section: Performance and Disclosurementioning

confidence: 99%

“…That is, managers make negative information more complex and difficult to understand. Similarly, the 'incomplete revelation hypothesis' by Grossman and Stiglitz (1980) and Bloomfield (2002) also suggest that mangers may strategically hide adverse information through less transparent disclosures. Smith and Taffler (1992) suggest poor readability is associated with poor performance while ease of readability is associated with financial success.…”

Section: Performance and Disclosurementioning

confidence: 99%

Information cost and member choice in the Australian superannuation industry

Peng¹

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This thesis examines the determinants of superannuation members' investment choices across fund families, with a focus on the effect of information costs. Existing literature on managed funds may not be easily generalised to the superannuation fund setting given the distinct attributes and behaviour of superannuation investors. In contrast to prior research, this thesis uses an actual decision-making measure, namely, member-nominated transfers, to examine investors who have 'made a choice' at the fund family level. While members' information costs are not directly observable or measurable, this thesis identifies two attributes that can reduce members' information search and processing costs, namely, superannuation fund families' visibility and transparency. Results indicate that, on average, industry superannuation fund families provide better PDS disclosure than their retail counterparts, in terms of both readability and the extent of disclosure.In addition, the causes and consequences of superannuation fund families' PDSs are studied inChapter 5 and Chapter 6. There is no significant relation between superannuation fund families'performance and the quality of PDS disclosure. Increased investment inflows encourage superannuation families to provide more information in an easier-to-understand manner in the PDS, especially the industry families. And better quality/content of PDS disclosure can attract inflows, especially for the retail families.

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The “Incomplete Revelation Hypothesis” and Financial Reporting

Cited by 534 publications

References 19 publications

From Accountability to Readability in the Public Sector: Evidence from Italian Universities

From Accountability to Readability in the Public Sector: Evidence from Italian Universities

Presentation Pattern and the Value Relevance of Comprehensive Income --- Evidence from China

Information cost and member choice in the Australian superannuation industry

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