Limited Attention: Implications for Financial Reporting

• 成果类型: Article
• 署名作者: Lu, Jinzhi
• 署名单位: City University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12432
• 发表日期: 2022
• 页码: 1991-2027
• 关键词: information acquisition; social value; accounting measurement; public information; COORDINATION; disclosure; MARKET; TRANSPARENCY; conservatism; EFFICIENCY

摘要

I develop a theory to study the consequences of providing more detailed information to rationally inattentive investors. I first consider a simple data-provision problem and show that adding more data or detail in financial statements can make it more difficult for investors to extract information. Consequently, investors who have limited information-processing capacity may prefer less detailed information. I also show that when investors' decisions are complements, providing details in addition to a summary may reduce investors' welfare. More specifically, because of increased disclosure of details, a coordination failure could occur in investors' attention-allocation decisions. By showing that adding more detail in financial statements can lead to an information overload problem for investors, this study yields valuable insights for accounting standard setters.