University of San Jose – Recoletos

Corners P. Lopez & Magallanes Streets, Cebu City 6000, Philippines

WEB-BASED
INFORMATION
ASYMMETRY
Communication Model
INTRODUCTION
• Accounting information is one of the most
important material that investors rely on in
stock markets.
• Any defect in this information leads to
information asymmetry available to
investors, which contributes to low
efficiency of the financial market and is
directly reflected in stock prices (Al-Shabib
& Al-Jabbouri, 2005).

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 Information Asymmetry is
the disparity and divergence in
the information available to the
owners of different stakeholders
in the company, investors,
creditors, management and
others (Wang et al., 2011)

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The web provides an
opportunity for the mass-
customization of information in
a manner that is impossible with
printed documents (Conklin et
al., 1987).

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This Research aims to:
Provide solutions to the
information asymmetry occurring
between accountants and the
potential and existing investors by
creating a communication model
that aims to address such problem.
WEB-BASED INFORMATION ASYMMETRY COMMUNICATION
MODEL
Financial Statements (message)
Credibility Barriers
 Incorporation of IASB Qualitative Semantic Barriers
Standards
 Use of Infographics and Visuals
 Summarized & Detailed
Expressed (Encode) Information
 Limited Use of Jargons

Interactive Barriers
Potential & Existing Investors
Accountants (source)
(receiver)
Company  Credibility Web
 Authenticity  Identification of credible websites with
 Information
(Channel) author’s credentials
 Analytical Skills
Technology Skills
 Knowledge on Financial Ratios

Technological Barriers

Feedback
 Loyalty
 Advocacy
Implied (Decode)
 Amount of Invested Capital

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FUNCTION OF THE COMPONENTS
1. Accountants, sources of the information
2. The message being sent out by the source in the form of
Financial Reports
3. Investors, recipients and primary users of the Financial Reports
4. The Channel at which the message is being conveyed which is
through the Internet or the Web,
5. The Outcomes or the Feedback of the communication between
the two parties—accountants and investors
6. The Barriers that affect the smooth flow of communication
between sender and receiver of the information

 The model also includes the express encoding of messages by

the source and the implied feedback of the receiver from the
message received.
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 Accountants (source)
 Credibility
 Authenticity
 Information Technology
Skills

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Credibility

In today’s global, data-driven culture,

credibility is more important than ever for
accountants (Lampton, 2019).

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nformation Technology Skills

They cause messages to become

distorted, subsequently leading to
confusion, misunderstanding and even
offense in some cases (Bequiri, 2018).

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 Financial Statements (message)
 Incorporation of IASB Qualitative
Standards
 Use of Infographics and Visuals
 Summarized & Detailed
Information
 Limited Use of Jargons

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Incorporation of the IASB Qualitative
Characteristics.
The qualitative characteristics of useful financial
reporting identify the types of information which are
likely to be most useful to users in making decisions
about the reporting entity on the basis of information in
its financial report (“Conceptual Framework for
Financial Reporting”, 2018).

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Summarized and Detailed
Information
Some may only be interested in
information pertaining to their
relationship with the organization
(Enginess, 2014)

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Potential & Existing Investors
(receiver)
 Identification of credible websites
with author’s credentials
 Analytical Skills
 Knowledge on Financial Ratios
Knowledge on Financial Ratios

Ratios measure companies' operational

efficiency, liquidity, stability and
profitability, giving investors more
relevant information than raw financial
data (Ingram, 2019).

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 Feedback
 Loyalty
 Advocacy
 Amount of Invested
Capital

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Loyalty
Loyalty is constantly considered a
pre-economic performance measure and
an overall success factor of the firm
(Hallowell, 1996).

Investor loyalty is interpreted as a

factor in reducing instability and cost of
capital (Gregory, 1998).

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COMMUNICATION
BARRIERS
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They cause messages to become
distorted, subsequently leading to
confusion, misunderstanding and even
offense in some cases (Bequiri, 2018).

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1. Credibility barriers

Credibility barriers interfere with digital

communications when people cannot trust the message,
the messenger, or both. On digital channels, it’s easy to
encounter messages out of context, assume the
messenger is biased, or impose a different meaning than
was intended (Girardin, 2018).

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2. Interactive barriers

Feedback process is not properly

observed because as mentioned, feedback
on web-based information is not expressly
transmitted to the accountants, but only
impliedly shown to investors’ actions
towards the company

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3. Semantic barriers

Semantic barriers to communication

are the symbolic obstacles that distort
the sent message in some other way than
intended, making the message difficult
to understand (Naik, 2019).

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4. Technological barriers

It is important that investors and

accountants both possess the same level
of technological skills as this will create a
bona fide settlement and promote a
smooth flow of communication between
them especially when using web-based
financial reports.

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CONCLUSION
Financial Statements
(message)
Credibility Barriers
 Incorporation of IASB Semantic Barriers
Qualitative Standards
 Use of Infographics and
Visuals
Expressed (Encode)  Summarized & Detailed
Information
 Limited Use of Jargons

Interactive Barriers
Accountants Potential & Existing Investors
(source) (receiver)

Company  Credibility Web  Identification of credible

 Authenticity websites with author’s
(Channel)
 Information credentials
Technology  Analytical Skills
Skills  Knowledge on Financial Ratios

Technological Barriers

Feedback
 Loyalty
 Advocacy
Implied (Decode)
 Amount of Invested Capital

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CONCLUSION

The communication model designed by the researchers can address

information asymmetry as it enumerates the factors and functions of each
components and the barriers that may impede the smooth flow of
communication.

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BIBLIOGRAPHY
(n.d.). Retrieved from https://www.fasb.org/jsp/FASB/Document_C/DocumentPage&cid=1176157114017.

(PDF) Internet corporate reporting: a research framework. (n.d.). Retrieved from

https://www.researchgate.net/publication/256842162_Internet_corporate_reporting_a_research_frame

work.

Admin. (2012, April 10). IAS plus. Retrieved from https://www.iasplus.com/en/standards/other/framework.

Al-Sakini, S. (2019, December 9). The Impact of Disclosure of the Financial Statements at the Level of
Information Asymmetry between Investors: An Empirical Study on the Commercial Banks in Jordan.
Retrieved from https://www.abacademies.org/articles/the-impact-of-disclosure-of-the-f inancial-
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8764.html.

Beqiri, G. (2019, August 2). Barriers to Effective Communication in the Workplace. Retrieved from
https://virtualspeech.com/blog/barriers-to-communication.
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BIBLIOGRAPHY
Bloomenthal, A. (2019, November 18). An Uneven Playing Field: Asymmetric Information. Retrieved from
https://www.investopedia.com/terms/a/asymmetricinformation.asp.

Financial Statement Analysis. (2016, October 13). Retrieved from https://www.cleverism.com/skills-and-

tools/financial-statement-analysis/.

Genre Analysis of Corporate Annual Report Narratives: A ... (n.d.). Retrieved from
https://journals.sagepub.com/doi/abs/10.1177/0021943605279244.

Girardin, L. (2018, August 8). The 7 Barriers to Digital Communication. Retrieved from
https://www.govloop.com/community/blog/7-barriers-digital-communication/?fbclid=IwAR2
ER9mOeLD3t2Em58I1Ie-2D82o48kRxxkt9l_4Z4VrypX7LIDqgR29uc.

Ingram, D. (2019, February 12). The Advantages of Financial Ratios. Retrieved from
https://smallbusiness.chron.com/advantages-financial-ratios-3973.html.

Technical Accounting Skills & Abilities - Key Skills for Accountants: Champlain College. (n.d.). Retrieved
from https://www.champlain.edu/online/blog/accountant-key-skills.

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