eBrief: The Observer Effect in Accounting

This is an eBrief by CFO Innovation, sponsored by Chicago Booth, that discusses financial reporting and accounting strategy. 

In the traditional view, management make decisions solely based on the information they have provided. Naturally better decisions are made with better information available. However, this may not be enough.

According to research, decisions should also be affected by the information in the capital market. 

Investors often demand more frequent and more detailed reporting, however too much reporting can be costly and somewhat misleading. Research shows that investors' short attention spans hurt long-term results by trying to meet heightened expectations by any means. 

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