Earnings presentation effects on manager reporting choices and investor decisions

Robert Libby, Scott Emett

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

We survey recent (mainly US) research on the effects of earnings presentation attributes on manager and user behavior. The literature we discuss relates to three primary earnings presentation attributes: (1) disaggregation (vertical and horizontal), (2) location (recognition vs. disclosure, which statement for recognized items, and within statement classification, labeling, and subtotals), and (3) narrative attributes (location of key amounts within narratives, readability, medium, and timing of disclosure). We show that disaggregation operates mainly by directly affecting information content. Location operates mainly by indirectly affecting information content through changes in managers' actions and by affecting ease of processing. Narrative presentation attributes operate mainly by affecting ease of processing. These differences in mechanisms determine the implications of the presentation attributes for contracting and valuation uses of accounting information. They also have implications for future research and standard setting.

Original languageEnglish (US)
Pages (from-to)410-438
Number of pages29
JournalAccounting and Business Research
Volume44
Issue number4
DOIs
StatePublished - Jul 4 2014
Externally publishedYes

Fingerprint

Investors
Managers
Disclosure
Information content
Disaggregation
Accounting information
User behavior
Contracting
Labeling
Readability

Keywords

  • classification shifting
  • disaggregation
  • financial statement presentation
  • location
  • market efficiency
  • narrative disclosures
  • recognition vs. disclosure
  • voluntary disclosure

ASJC Scopus subject areas

  • Accounting

Cite this

Earnings presentation effects on manager reporting choices and investor decisions. / Libby, Robert; Emett, Scott.

In: Accounting and Business Research, Vol. 44, No. 4, 04.07.2014, p. 410-438.

Research output: Contribution to journalArticle

@article{23b7ad9b10d34ecb85f22fcd6318db91,
title = "Earnings presentation effects on manager reporting choices and investor decisions",
abstract = "We survey recent (mainly US) research on the effects of earnings presentation attributes on manager and user behavior. The literature we discuss relates to three primary earnings presentation attributes: (1) disaggregation (vertical and horizontal), (2) location (recognition vs. disclosure, which statement for recognized items, and within statement classification, labeling, and subtotals), and (3) narrative attributes (location of key amounts within narratives, readability, medium, and timing of disclosure). We show that disaggregation operates mainly by directly affecting information content. Location operates mainly by indirectly affecting information content through changes in managers' actions and by affecting ease of processing. Narrative presentation attributes operate mainly by affecting ease of processing. These differences in mechanisms determine the implications of the presentation attributes for contracting and valuation uses of accounting information. They also have implications for future research and standard setting.",
keywords = "classification shifting, disaggregation, financial statement presentation, location, market efficiency, narrative disclosures, recognition vs. disclosure, voluntary disclosure",
author = "Robert Libby and Scott Emett",
year = "2014",
month = "7",
day = "4",
doi = "10.1080/00014788.2014.906121",
language = "English (US)",
volume = "44",
pages = "410--438",
journal = "Accounting and Business Research",
issn = "0001-4788",
publisher = "Routledge",
number = "4",

}

TY - JOUR

T1 - Earnings presentation effects on manager reporting choices and investor decisions

AU - Libby, Robert

AU - Emett, Scott

PY - 2014/7/4

Y1 - 2014/7/4

N2 - We survey recent (mainly US) research on the effects of earnings presentation attributes on manager and user behavior. The literature we discuss relates to three primary earnings presentation attributes: (1) disaggregation (vertical and horizontal), (2) location (recognition vs. disclosure, which statement for recognized items, and within statement classification, labeling, and subtotals), and (3) narrative attributes (location of key amounts within narratives, readability, medium, and timing of disclosure). We show that disaggregation operates mainly by directly affecting information content. Location operates mainly by indirectly affecting information content through changes in managers' actions and by affecting ease of processing. Narrative presentation attributes operate mainly by affecting ease of processing. These differences in mechanisms determine the implications of the presentation attributes for contracting and valuation uses of accounting information. They also have implications for future research and standard setting.

AB - We survey recent (mainly US) research on the effects of earnings presentation attributes on manager and user behavior. The literature we discuss relates to three primary earnings presentation attributes: (1) disaggregation (vertical and horizontal), (2) location (recognition vs. disclosure, which statement for recognized items, and within statement classification, labeling, and subtotals), and (3) narrative attributes (location of key amounts within narratives, readability, medium, and timing of disclosure). We show that disaggregation operates mainly by directly affecting information content. Location operates mainly by indirectly affecting information content through changes in managers' actions and by affecting ease of processing. Narrative presentation attributes operate mainly by affecting ease of processing. These differences in mechanisms determine the implications of the presentation attributes for contracting and valuation uses of accounting information. They also have implications for future research and standard setting.

KW - classification shifting

KW - disaggregation

KW - financial statement presentation

KW - location

KW - market efficiency

KW - narrative disclosures

KW - recognition vs. disclosure

KW - voluntary disclosure

UR - http://www.scopus.com/inward/record.url?scp=84901356079&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84901356079&partnerID=8YFLogxK

U2 - 10.1080/00014788.2014.906121

DO - 10.1080/00014788.2014.906121

M3 - Article

AN - SCOPUS:84901356079

VL - 44

SP - 410

EP - 438

JO - Accounting and Business Research

JF - Accounting and Business Research

SN - 0001-4788

IS - 4

ER -