And yet, says Stanford professor of accounting Iván Marinovic, financial statements are becoming less and less relevant compared to other sources of information, such as analysts and news outlets. Perhaps in at attempt to keep pace in the information age, and to tell the whole story of increasingly complex businesses, he says, there is a creeping trend in financial disclosures away from the reliance on verifiable assets and toward more intangible elements of a business’s operations. Using game theory, Marinovic and Jeremy Bertomeu of Baruch College developed a theoretical framework to better understand the interplay between two competing channels of information in financial disclosures: “hard” information such as revenue or sales that are easy to measure, and “soft” information such as the value of patents or brands that are difficult to quantify.
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