The Kent and Munro (1999) study on differential reporting aligns closely with Full-Disclosure, Information Production, and Market Efficiency Theory. Under the Full-Disclosure principle, users require sufficient and relevant information to make informed decisions. Because differential reporting reduces disclosures, the study examined whether this reduction harms decision usefulness. The findings show that loan officers' assessments of repayment ability did not change when they received simplified statements, but they did request more additional information, demonstrating that reduced disclosure affects the process, not the outcome.

This outcome directly supports Information Production theory, which states that when preparers provide less information, users must produce more on their own. In the study, loan officers relying on differential reporting engaged in more information gathering to compensate for missing details, meaning the burden of information production shifted from the company to the lender.

The results also connect to Market Efficiency Theory. Even though the simplified statements contained less detail, loan officers still arrived at the same lending decisions, suggesting that users were able to interpret and process available information rationally. This reflects a semi-strong efficient environment, where reduced disclosure did not lead to misjudgment or poor decisions. Combined, these three frameworks explain why differential reporting did not harm decision usefulness but did increase user effort. Required: Please make this content fully humanized with over a 95% human score. Keep it the same style written and correct spelling and grammar