AAA Spark Meeting of Regions

Economic Policy Uncertainty and Accounting Reporting Complexity

• In Event: FAR: Financial Statement Comparabiity and COVID-19 impact on organizational outcomes

Abstract

Economic policy uncertainty refers to the uncertainty arising from the government’s passing of economic policies. We find that high economic policy uncertainty lowers the complexity of firms’ accounting reports because firms hold off a wide range of hard-to-reverse business activities while facing high uncertainty. This negative effect is driven by all components of economic policy uncertainty and by all categories of domestic policies. Additionally, the effect is stronger for firms depending more on the government for their operations. Further analyses show that high economic policy uncertainty decreases the number of firms’ qualitative disclosures but increases the average length per disclosure. Our study contributes to the growing literature examining the impact of macroeconomic turbulence in the form of economic policy uncertainty on firm-level accounting properties and to the literature using the eXtensible Business Reporting Language methodology in accounting research.

Authors

• Nate Quang Nguyen, Colorado State University

• Tri Nguyen, University of Brighton

• Nhung Vu, Loughborough University