Shareholder activism and accounting reporting complexity

PurposeIn this paper the authors aim to examine whether shareholder activism is associated with accounting reporting complexity (ARC).Design/methodology/approachThe authors employ ordinary least squares (OLS) and a sample of 19,530 firm-year observations (representing 3,377 unique firms) over the 2010-2019 period to test the prediction.FindingsThe authors find that firms with shareholder activism provide more complex accounting reporting. Further, both types of activism (including Concern & Dispute and Control & Discussion) are positively associated with ARC. The authors also find that the association between shareholder activism and ARC is more pronounced when the firms have a higher level of litigation risk and a higher proportion of institutional ownership. Collectively, the findings suggest that firms with shareholder activism may be under more pressure to disclose more accounting items, leading to more complex accounting reporting.Originality/valueThe study may be informative to regulators considering the costs and benefits of shareholder activism in financial reporting.