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Information 2016, 7(3), 48; doi:10.3390/info7030048

The Information Content of Accounting Reports: An Information Theory Perspective

School of Management, State University of New York at Binghamton, Binghamton, NY 13902, USA
Academic Editor: Willy Susilo
Received: 26 March 2016 / Revised: 1 July 2016 / Accepted: 18 July 2016 / Published: 29 July 2016
(This article belongs to the Section Information Theory and Methodology)
View Full-Text   |   Download PDF [410 KB, uploaded 29 July 2016]   |  

Abstract

Is it possible to quantify the information content of accounting reports? If possible, then how? This study examines accounting as a classical communication system with the purpose of providing a framework with which to approach these fundamentally important questions. Information theory was established in the early-mid 20th century to describe the properties of classical communication systems. Applying concepts from this theory to an accounting context provides insight into the questions asked above. Specifically, a measure of the information content of financial statement numbers is developed from these information theory concepts. The measure is also applied to several large companies’ earnings numbers and aids in predicting their price movements. View Full-Text
Keywords: information theory; accounting information; uncertainty; entropy information theory; accounting information; uncertainty; entropy
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Ross, J.F. The Information Content of Accounting Reports: An Information Theory Perspective. Information 2016, 7, 48.

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