When information gets dense: the role of cognitive load in corporate reporting behavior

This study investigates how financial statement complexity (FSC) affects users’ cognitive load (CL) and examines the mediating role of voluntary disclosure level (VDL). CL refers to the mental effort required to process financial information. Drawing on Cognitive Load Theory (CLT), it distinguishes between intrinsic CL, arising from the inherent complexity of transactions and accounting standards, and extraneous CL, stemming from presentation and disclosure choices. Using path analysis on non-financial firms listed on the Egyptian Exchange (EGX 100) from 2010 to 2018, the study examines the direct, indirect, and total effects between FSC, VDL, and CL. The results show that FSC is positively associated with VDL, suggesting that managers of more complex firms provide additional voluntary information to reduce information asymmetry. At the same time, VDL is positively associated with CL, indicating that excessive or poorly structured disclosure can increase users’ cognitive effort. VDL is also found to mediate the relationship between FSC and CL, suggesting that the effect of FSC on CL operates indirectly through disclosure behavior. The findings have practical implications for regulators, standard setters, and report preparers seeking to enhance the decision-usefulness of corporate reports. This study provides early evidence from Egypt on the links among FSC, VDL, and CL, showing how disclosure design can either alleviate or exacerbate cognitive overload in financial reporting.