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Dr Stefano Cascino presents to the IASB

22 January 2014 

Stefano Pic


Dr Stefano Cascino (along with the other members of a research team awarded in 2012 with an ICAS-EFRAG grant), presented the findings from the research monograph titled “The Use of Information by Capital Providers”  to the International Accounting Standards Board (IASB) on 22 January 2014.

The objective of the research monograph was to survey the evidence on the use of financial accounting information by capital providers of public interest entities across Europe. Based on this evidence, the report reaches four main conclusions.

First, the study documents that capital providers are heterogeneous and that their information needs differ systematically. Information can be used to affect firm behaviour and cash flows via contractual arrangements (i.e., the stewardship role of accounting) and to value claims to reporting firms (i.e., the valuation role of accounting). While both accounting objectives yield similar information needs in some circumstances, theoretical studies identify areas where both objectives produce divergent information demands.  Second, the findings provide clear evidence that capital providers use multiple information sources and that these information sources interact. Third, direct, experimental and archival evidence clearly documents that investors tend to ignore or “miss-evaluate” relevant information. For example, even apparently benign presentational differences can have significant effects on capital providers’ decisions. While these behavioural aspects are extremely pronounced for individual investors, even professional equity investors seem to base their decisions on sub-optimal information and decision rules. This, in turn, implies that information-processing costs are relevant even for sophisticated capital providers. Fourth, the report highlights that we know surprisingly little about the actual information usage by capital providers. Direct evidence is scarce and many inferences are based on archival data that reflect investor decision behaviour and not their information gathering activities. Collectively, these findings have far-reaching implications for the current discussions surrounding the conceptual framework for financial reporting.

Please click here for a link for the webcast for the IASB talk.