Frank Hodge
University of Washington
Jane Jollineau Kennedy
University of Washington
Laureen A. Maines
Indiana University
Abstract: XBRL (Extensible Business Reporting Language) is an emerging technology that facilitates directed searches and simultaneous presentation of related financial statement and footnote information. We use an experiment to investigate the effect of using this search-facilitating technology on how individuals react to recognition versus disclosure of stock option compensation information. We find that participants who do not have access to search-facilitating technology make different financial performance judgments and investment decisions when stock option compensation is recognized in the income statement than when stock option compensation is disclosed in the footnotes. This difference diminishes when participants complete the same task with the help of search facilitating technology. In addition, participants perceive greater differences in financial statement reliability between recognition and disclosure when they use search-facilitating technology. Overall, our findings suggest that search-facilitating technologies, such as XBRL, have the potential to improve the transparency of managementsÂ’ financial reporting choices to nonprofessional investors.
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