Standardization of Financial and Nonfinancial Information

Daske uses a linguistic methodology and a large-scale analysis of textual data to explore how stakeholder incentives and regulatory interventions affect the standardization of reporting data. The level of standardization is a key determinant of information processing costs and thus a prime candidate to explain the efficiency of information reception by users of financial reporting information. Ultimately, information probably needs a certain level of standardization to cause transparency. A08 explores this link by studying how the level of standardization affects capital-market outcome measures of transparency.

• Research Question

  What are benefits and costs of more standardization of disclosed company information, and how does standardization affect user’s perceptions of transparency?
  

• Research Motivation

  In this project, we investigate determinants and consequences of standardized company information. Standardization is a core issue in accounting (Leuz and Wysocki, 2016) and the level of standardization affects the clarity of the information disclosed (i.e., standardized information is easier to process, hence it reduces information processing cost) and ultimately firms’ transparency.

• Research Program

  In the second funding period, we plan to extend our work on determinants and consequences of standardized company information by exploiting major recent standardization initiatives: The introduction of electronic filing requirements (xHMTL, European Single Electronic Format ESEF), initiatives aimed at standardizing nonfinancial information through the International Sustainability Standards Board (ISSB), and standardization of company identification through a unique identifier (Legal Entity Identifier LEI). While all those initiatives foster standardization of company information, they offer unique angles to enhance our understanding of the benefits and costs of standardization.

• Research Contribution

  The project contributes to the work of the IFRS Taxonomy group, the ESMA, and the ISSB. For the academic audience, we expect to expand our understanding of the benefits and costs of more standardization of company information.