Developing a Framework of Improved Decision Usefulness in Financial Information
Abstract
It is indispensable to improve decision usefulness for decision-making process for business. This study attempts to seek a framework of expanding a concept of decision usefulness (DU) through a regulatory-process check and a review of financial information literature and the extent to which future research opportunities could emerge from this DU concept for the improved decision usefulness (IDU). The regulatory process and research trends on financial information show that financial-information decision has evolved from reliability-driven to relevance-driven financial-information theories and moves forward to international accounting standardization issues. To this end, the development of ‘synthesis’ theories and approaches in financial information offers many future empirical-study chances for improved decision usefulness.
Keywords: Decision Usefulness; Financial Information; Reliability-Driven Financial Information; Relevance-Driven Financial Information; International Accounting Standardization.
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References
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Baboukardos, D., & Rimmel, G. (2016). Value relevance of accounting information under an integrated reporting approach: A research note. Journal of Accounting and Public Policy, 35(4), 437–452. https://doi.org/10.1016/j.jaccpubpol.2016.04.004
Ball, R. (2016). IFRS – 10 years later. Accounting and Business Research, 46(5), 545–571. https://doi.org/doi:10.1080/00014788.2016.1182710
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159–178. https://doi.org/DOI: 10.2307/2490232
Baridwan, Z., Machfoedz, M., & Tearney, M. G. (2001). An Evaluation of Disclosure Finacial Information by Public Companies in Indonesia.
Beaver, W.H., Kettler, P., & Scholes, M. (1970). The Association between Market Determined and Accounting Determined Risk Measures. Accounting Review, 45(4), 654–682. https://www.jstor.org/stable/244204
Beaver, William H. (1968). The information content of annual earnings announcements. Journal of Accounting Research, 6(Empirical Research in Accounting: Selected Studies), 67–92. https://doi.org/DOI: 10.2307/2490070
Beretta, S., & Bozzolan, S. (2004). A framework for the analysis of firm risk communication. The International Journal of Accounting, 39(3), 265–288. https://doi.org/10.1016/j.intacc.2004.06.006
Botosan, C.A., & Plumlee, M. A. (2013). Are information attributes are priced? Business Finance and Accounting, 40(9–10), 21–53. https://doi.org/10.1111/jbfa.12044
Brummet, R. (1957). Overhead Costing. Ann Arbor: Bureau of Business Research, University of Michigan.
Camfferman, K., & Zeff, S. A. (2017). The Challenge of Setting Standards for a Worldwide Constituency: Research Implications from the IASB’s Early History. European Accounting Review, 27(2), 289–312. https://doi.org/doi:10.1080/09638180.2017.1296780
Chambers, R. J. (1961). Towards A General Theory of Accounting. The University of Adelaide: Australian Society of Accountants Research Lecture.
Choi, B., Collins, D. W., & Johnson, W. B. (1997). Valuation implications of reliability differences: The case of non-pension postretirement obligations. Accounting Review, 72(3), 351–383. https://www.jstor.org/stable/248476
Collins, D. W., Kothari, S. P., Shanken, J., & Sloan, R. G. (1994). Lack of timeliness and noise as explanations for the low contemporaneuos return-earnings association. Journal of Accounting and Economics, 18(3), 289–324. https://doi.org/doi:10.1016/0165-4101(94)90024-8
Cormier, D., Magnan, M., & Morard, B. (2000). The contractual and value relevance of reported earnings in a dividend-focused environment. European Accounting Review, 9(3), 387–417. https://doi.org/doi:10.1080/09638180020017131
Craighead, J., Magnan, M., & Thorne, L. (2004). The impact of mandated disclosure on performance-based CEO compensation. Contemporary Accounting Research, 21(2), 369–398. https://doi.org/10.1506/BPCX-D3FC-Y8VY-M541
Dhaliwal, Dan S., Spicer, B. H., & Vickrey, D. (1979). The quality of disclosure and the cost of capital. Journal of Business Finance and Accounting, 6(2), 245–266. https://doi.org/10.1111/j.1468-5957.1979.tb01089.x
Dyckman, T. R., & Zeff, S. A. (1984). Two Decades of the Journal of Accounting Research. Journal of Accounting Research, 22(1), 225–297. https://doi.org/10.2307/2490710
Elliott, R. K., & Jacobson, P. D. (1994). Costs and benefits of business information disclosure. Accounting Horizons, 8(4), 80–96.
Falk, H., Lynn, B., Mestelman, S., & Shehata., M. (1999). Auditor independence, self-interested behavior and ethics: Some experimental evidence. Journal of Accounting and Public Policy, 18(4–5), 395–428. https://doi.org/10.1016/S0278-4254(99)00012-5
Fama, E. (1968). Risk, return and equilibrium: Some clarifying comments. The Journal of Finance, 23(1), 29–40. https://doi.org/10.1111/j.1540-6261.1968.tb02996.x
Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417, 25(2), 383–417. https://doi.org/DOI: 10.2307/2325486
Farooq, S., Ahmed, S., & Saleem, K. (2015). Overinvestment, growth opportunities and firm performance: Evidence from Singapore stock market. Corporate Ownership & Control, 12(3), 454–467. https://doi.org/DOI: 10.22495/cocv12i3c4p6
Feltham, J., & Ohlson, J. A. (1995). Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research, 11(2), 689–731. https://doi.org/10.1111/j.1911-3846.1995.tb00462.x
Hájek, P., & Olej, V. (2013). Evaluating sentiment in annual reports for financial distress prediction using neural networks and support vector machines. In Engineering Applications of Neural Networks. EANN 2013.
Communications in Computer and Information Science (Iliadis L., Papadopoulos H., Jayne C., Vol. 384). Springer, Berlin, Heidelberg. DOI https://doi.org/10.1007/978-3-642-41016-1_1
Hartono, J., & Saputro, J. A. (2019). Topik-topik Riset Akuntansi Pasar Modal (Market-based accounting research topics). In Kajian Literatur dan Arah Topik Riset ke Depan (Literature Review and Future Direction for Research Topics) (Prof. Jogiyanto Hartono M., MBA., Ph.D). Master-of-Science and Doctoral Program of Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia.
Hepworth, S. (1956). Reporting foreign operations. Ann Arbor: Bureau of Business Research. University of Michigan.
Hodder, L., McNally, M. L., & Weaver, C. (2003). The Influence of Tax and NonTax Factors on Banks’ Choice of Organizational Form. The Accounting Review, 78(1), 297–326. https://doi.org/DOI: 10.2308/accr.2003.78.1.297
Holthausen, R. W., & Larcker, D. F. (1992). The prediction of stock returns using financial statement information. Journal of Accounting and Economics, 15(2), 373–411. https://doi.org/10.1016/0165-4101(92)90025-W
Jones, J.J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228. https://doi.org/DOI: 10.2307/2491047
Karuna, C. (2019). Capital markets research in accounting: Lessons learnt and future implications. Pacific-Basin Finance Journal, 55(March), 161–168. https://doi.org/10.1016/j.pacfin.2019.03.001
Kormendi, R., & Lipe, R. (1987). Earnings innovations, earnings persistence, and stock returns. The Journal of Business, 60(3), 323–345. https://www.jstor.org/stable/2352874
Lai, S. M., Liu, C. L., & Wang, T. (2014). Increased disclosure and investment efficiency. Asia-Pacific Journal of Accounting & Economics, 21(3), 308-327, 21(3), 308–327. https://doi.org/DOI: 10.1080/16081625.2012.741791
Lev, B. (1989). On the usefulness of earnings: Lesson and directions from two decades of empirical research. Journal of Accounting Research, 27(Supplement), 153–192. https://doi.org/DOI: 10.2307/2491070
Lev, B., & Thiagarajan, S. R. (1993). Fundamental information analysis. Journal of Accounting Research, 31(2), 190–215. https://doi.org/DOI: 10.2307/2491270
Loughran, T., & McDonald, B. (2014). Measuring Readability in Financial Disclosures. Journal of Finance, 69(4), 1643–1671. https://EconPavpers.repec.org/RePEc:bla:jfinan:v:69:y:2014:i:4:p:1643-1671
Obeng, V. A., Ahmed, K., & Miglani, S. (2020). Integrated reporting and earnings quality: The moderating effect of agency costs. Pacific-Basin Finance Journal, 60(April), 101285. https://doi.org/10.1016/j.pacfin.2020.101285
Ou, J.A. (1990). The Incremental information content of non-earnings accounting numbers as earnings predictors. Journal of Accounting Research, 28(1), 144–163. https://doi.org/DOI: 10.2307/2491220
Ou, Jane A., & Penman, S. H. (1989). Financial statement analysis and the prediction of stock returns. Journal of Accounting and Economics, 11(4), 295–329. https://doi.org/10.1016/0165-4101(89)90017-7
Paton, W. J. R. (1958). A study in liquidity. Ann Arbor: Bureau of Business Research, University of Michigan.
Pillai, R., Al-Malkawi, & Nizar, H. A. (2018). On the relationship between corporate governance and firm performance: Evidence from GCC countries. Research in International Business and Finance, 44(April), 394–410. http://dx.doi.org/10.1016/j.ribaf.2017.07.110
Pope, P. F., & Walker, M. (1999). International differences in the timeliness, conservatism, and classification of earnings. Journal of Accounting Research, 37(Supplement), 53–87. https://doi.org/DOI: 10.2307/2491345
Schindler, J. (1958). Quasi-Reorganization. Ann Arbor: Bureau of Business Research, University of Michigan.
Scott, William R. (2000). Financial Accounting Theory (2nd Ed.). Prentice Hall.
Sekaran, U., & Bougie, R. (2010). Research methods for business: A skill-building approach (Fifth Ed.). Haddington: John Wiley & Sons.
Staubus, G. A. (1961). Theory of Accounting to Investors. Berkeley: University of California Press.
Stedry, A. (1960). Budget control and cost behavior. Englewood Cliffs, N.J.: Prentice-Hall.
Van-Beest, Braam, G., & Boelens, S. (2009). Quality of financial reporting: Measuring qualitative characteristics [Working Paper 09-108].
Vena, L., Sciascia, S., & Cortesi, A. (2019). Integrated reporting and cost of capital: The moderating role of cultural dimensions. Journal of International Financial Management & Accounting. https://doi.org/doi:10.1111/jifm.12113
Watts, R., & Zimmerman, J. (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53(1), 112–134. https://www.jstor.org/stable/245729
Zeff, S. A. (2005). The evolution of U.S. GAAP: The political forces behind professional standards. The CPA Journal, 75(1-2), 19–27. http://archives.cpajournal.com/2005/205/infocus/p18.htm
Zhang, X. F. (2006). Information Uncertainty and Stock Returns. The Journal of Finance, 61(1), 105–137. https://doi.org/10.1111/j.1540-6261.2006.00831.x
Aboody, D., Barth, M., & Kasznik, R. (2004a). Firms’ voluntary recognition of stock-based compensation expense. Journal of Accounting Research, 42(2), 123–158. https://doi.org/10.1111/j.1475-679X.2004.00132.x
Ashton, R. (1974). An experimental study of internal control judgments. Journal of Accounting Research, 12(1), 143–157. https://doi.org/DOI: 10.2307/2490532
Ayturk, Y., Asutay, M., & Aksak, E. (2017). What explains corporate sukuk primary market spreads? Research in International Business and Finance, 40(April), 141–149. http://dx.doi.org/10.1016/j.ribaf.2017.01.002
Baboukardos, D., & Rimmel, G. (2016). Value relevance of accounting information under an integrated reporting approach: A research note. Journal of Accounting and Public Policy, 35(4), 437–452. https://doi.org/10.1016/j.jaccpubpol.2016.04.004
Ball, R. (2016). IFRS – 10 years later. Accounting and Business Research, 46(5), 545–571. https://doi.org/doi:10.1080/00014788.2016.1182710
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159–178. https://doi.org/DOI: 10.2307/2490232
Baridwan, Z., Machfoedz, M., & Tearney, M. G. (2001). An Evaluation of Disclosure Finacial Information by Public Companies in Indonesia.
Beaver, W.H., Kettler, P., & Scholes, M. (1970). The Association between Market Determined and Accounting Determined Risk Measures. Accounting Review, 45(4), 654–682. https://www.jstor.org/stable/244204
Beaver, William H. (1968). The information content of annual earnings announcements. Journal of Accounting Research, 6(Empirical Research in Accounting: Selected Studies), 67–92. https://doi.org/DOI: 10.2307/2490070
Beretta, S., & Bozzolan, S. (2004). A framework for the analysis of firm risk communication. The International Journal of Accounting, 39(3), 265–288. https://doi.org/10.1016/j.intacc.2004.06.006
Botosan, C.A., & Plumlee, M. A. (2013). Are information attributes are priced? Business Finance and Accounting, 40(9–10), 21–53. https://doi.org/10.1111/jbfa.12044
Brummet, R. (1957). Overhead Costing. Ann Arbor: Bureau of Business Research, University of Michigan.
Camfferman, K., & Zeff, S. A. (2017). The Challenge of Setting Standards for a Worldwide Constituency: Research Implications from the IASB’s Early History. European Accounting Review, 27(2), 289–312. https://doi.org/doi:10.1080/09638180.2017.1296780
Chambers, R. J. (1961). Towards A General Theory of Accounting. The University of Adelaide: Australian Society of Accountants Research Lecture.
Choi, B., Collins, D. W., & Johnson, W. B. (1997). Valuation implications of reliability differences: The case of non-pension postretirement obligations. Accounting Review, 72(3), 351–383. https://www.jstor.org/stable/248476
Collins, D. W., Kothari, S. P., Shanken, J., & Sloan, R. G. (1994). Lack of timeliness and noise as explanations for the low contemporaneuos return-earnings association. Journal of Accounting and Economics, 18(3), 289–324. https://doi.org/doi:10.1016/0165-4101(94)90024-8
Cormier, D., Magnan, M., & Morard, B. (2000). The contractual and value relevance of reported earnings in a dividend-focused environment. European Accounting Review, 9(3), 387–417. https://doi.org/doi:10.1080/09638180020017131
Craighead, J., Magnan, M., & Thorne, L. (2004). The impact of mandated disclosure on performance-based CEO compensation. Contemporary Accounting Research, 21(2), 369–398. https://doi.org/10.1506/BPCX-D3FC-Y8VY-M541
Dhaliwal, Dan S., Spicer, B. H., & Vickrey, D. (1979). The quality of disclosure and the cost of capital. Journal of Business Finance and Accounting, 6(2), 245–266. https://doi.org/10.1111/j.1468-5957.1979.tb01089.x
Dyckman, T. R., & Zeff, S. A. (1984). Two Decades of the Journal of Accounting Research. Journal of Accounting Research, 22(1), 225–297. https://doi.org/10.2307/2490710
Elliott, R. K., & Jacobson, P. D. (1994). Costs and benefits of business information disclosure. Accounting Horizons, 8(4), 80–96.
Falk, H., Lynn, B., Mestelman, S., & Shehata., M. (1999). Auditor independence, self-interested behavior and ethics: Some experimental evidence. Journal of Accounting and Public Policy, 18(4–5), 395–428. https://doi.org/10.1016/S0278-4254(99)00012-5
Fama, E. (1968). Risk, return and equilibrium: Some clarifying comments. The Journal of Finance, 23(1), 29–40. https://doi.org/10.1111/j.1540-6261.1968.tb02996.x
Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417, 25(2), 383–417. https://doi.org/DOI: 10.2307/2325486
Farooq, S., Ahmed, S., & Saleem, K. (2015). Overinvestment, growth opportunities and firm performance: Evidence from Singapore stock market. Corporate Ownership & Control, 12(3), 454–467. https://doi.org/DOI: 10.22495/cocv12i3c4p6
Feltham, J., & Ohlson, J. A. (1995). Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research, 11(2), 689–731. https://doi.org/10.1111/j.1911-3846.1995.tb00462.x
Hájek, P., & Olej, V. (2013). Evaluating sentiment in annual reports for financial distress prediction using neural networks and support vector machines. In Engineering Applications of Neural Networks. EANN 2013.
Communications in Computer and Information Science (Iliadis L., Papadopoulos H., Jayne C., Vol. 384). Springer, Berlin, Heidelberg. DOI https://doi.org/10.1007/978-3-642-41016-1_1
Hartono, J., & Saputro, J. A. (2019). Topik-topik Riset Akuntansi Pasar Modal (Market-based accounting research topics). In Kajian Literatur dan Arah Topik Riset ke Depan (Literature Review and Future Direction for Research Topics) (Prof. Jogiyanto Hartono M., MBA., Ph.D). Master-of-Science and Doctoral Program of Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia.
Hepworth, S. (1956). Reporting foreign operations. Ann Arbor: Bureau of Business Research. University of Michigan.
Hodder, L., McNally, M. L., & Weaver, C. (2003). The Influence of Tax and NonTax Factors on Banks’ Choice of Organizational Form. The Accounting Review, 78(1), 297–326. https://doi.org/DOI: 10.2308/accr.2003.78.1.297
Holthausen, R. W., & Larcker, D. F. (1992). The prediction of stock returns using financial statement information. Journal of Accounting and Economics, 15(2), 373–411. https://doi.org/10.1016/0165-4101(92)90025-W
Jones, J.J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228. https://doi.org/DOI: 10.2307/2491047
Karuna, C. (2019). Capital markets research in accounting: Lessons learnt and future implications. Pacific-Basin Finance Journal, 55(March), 161–168. https://doi.org/10.1016/j.pacfin.2019.03.001
Kormendi, R., & Lipe, R. (1987). Earnings innovations, earnings persistence, and stock returns. The Journal of Business, 60(3), 323–345. https://www.jstor.org/stable/2352874
Lai, S. M., Liu, C. L., & Wang, T. (2014). Increased disclosure and investment efficiency. Asia-Pacific Journal of Accounting & Economics, 21(3), 308-327, 21(3), 308–327. https://doi.org/DOI: 10.1080/16081625.2012.741791
Lev, B. (1989). On the usefulness of earnings: Lesson and directions from two decades of empirical research. Journal of Accounting Research, 27(Supplement), 153–192. https://doi.org/DOI: 10.2307/2491070
Lev, B., & Thiagarajan, S. R. (1993). Fundamental information analysis. Journal of Accounting Research, 31(2), 190–215. https://doi.org/DOI: 10.2307/2491270
Loughran, T., & McDonald, B. (2014). Measuring Readability in Financial Disclosures. Journal of Finance, 69(4), 1643–1671. https://EconPavpers.repec.org/RePEc:bla:jfinan:v:69:y:2014:i:4:p:1643-1671
Obeng, V. A., Ahmed, K., & Miglani, S. (2020). Integrated reporting and earnings quality: The moderating effect of agency costs. Pacific-Basin Finance Journal, 60(April), 101285. https://doi.org/10.1016/j.pacfin.2020.101285
Ou, J.A. (1990). The Incremental information content of non-earnings accounting numbers as earnings predictors. Journal of Accounting Research, 28(1), 144–163. https://doi.org/DOI: 10.2307/2491220
Ou, Jane A., & Penman, S. H. (1989). Financial statement analysis and the prediction of stock returns. Journal of Accounting and Economics, 11(4), 295–329. https://doi.org/10.1016/0165-4101(89)90017-7
Paton, W. J. R. (1958). A study in liquidity. Ann Arbor: Bureau of Business Research, University of Michigan.
Pillai, R., Al-Malkawi, & Nizar, H. A. (2018). On the relationship between corporate governance and firm performance: Evidence from GCC countries. Research in International Business and Finance, 44(April), 394–410. http://dx.doi.org/10.1016/j.ribaf.2017.07.110
Pope, P. F., & Walker, M. (1999). International differences in the timeliness, conservatism, and classification of earnings. Journal of Accounting Research, 37(Supplement), 53–87. https://doi.org/DOI: 10.2307/2491345
Schindler, J. (1958). Quasi-Reorganization. Ann Arbor: Bureau of Business Research, University of Michigan.
Scott, William R. (2000). Financial Accounting Theory (2nd Ed.). Prentice Hall.
Sekaran, U., & Bougie, R. (2010). Research methods for business: A skill-building approach (Fifth Ed.). Haddington: John Wiley & Sons.
Staubus, G. A. (1961). Theory of Accounting to Investors. Berkeley: University of California Press.
Stedry, A. (1960). Budget control and cost behavior. Englewood Cliffs, N.J.: Prentice-Hall.
Van-Beest, Braam, G., & Boelens, S. (2009). Quality of financial reporting: Measuring qualitative characteristics [Working Paper 09-108].
Vena, L., Sciascia, S., & Cortesi, A. (2019). Integrated reporting and cost of capital: The moderating role of cultural dimensions. Journal of International Financial Management & Accounting. https://doi.org/doi:10.1111/jifm.12113
Watts, R., & Zimmerman, J. (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53(1), 112–134. https://www.jstor.org/stable/245729
Zeff, S. A. (2005). The evolution of U.S. GAAP: The political forces behind professional standards. The CPA Journal, 75(1-2), 19–27. http://archives.cpajournal.com/2005/205/infocus/p18.htm
Zhang, X. F. (2006). Information Uncertainty and Stock Returns. The Journal of Finance, 61(1), 105–137. https://doi.org/10.1111/j.1540-6261.2006.00831.x
Published
2021-05-25
How to Cite
QIZAM, Ibnu.
Developing a Framework of Improved Decision Usefulness in Financial Information.
E-Jurnal Akuntansi, [S.l.], v. 31, n. 5, p. 1229-1246, may 2021.
ISSN 2302-8556.
Available at: <https://ojs.unud.ac.id/index.php/akuntansi/article/view/67207>. Date accessed: 19 nov. 2024.
doi: https://doi.org/10.24843/EJA.2021.v31.i05.p12.
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