The Effects of Financial Reporting and Disclosure on Corporate Investment: A Review

Roychowdhury, Sugata; Shroff, Nemit; Verdi, Rodrigo S.

doi:10.2139/ssrn.3364582

Cited by 44 publications

(62 citation statements)

References 198 publications

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“…These firms may not be expected to provide substantial positive information externalities. Besides this institutional feature, however, there are also important economic reasons for why one would expect reporting mandates to primarily yield reallocative effects (e.g., mandated firms lose, entrants gain) rather than an aggregate improvement (e.g., due to substantial information externalities; for a related discussion, see Roychowdhury, Shroff, and Verdi [2019]).…”

Section: Discussionmentioning

confidence: 99%

“…A firm's mandatory reporting, for example, could help its competitors invest more efficiently and avoid duplicate market‐intelligence efforts. If this helps competitors more than the loss of proprietary information hurts the reporting firm, this mandate improves the aggregate allocation of resources (see Roychowdhury, Shroff, and Verdi [2019] for discussion). The literature provides fewer examples of positive externalities for auditing (e.g., Donovan et al.…”

Section: Introductionmentioning

confidence: 99%

“…It is a first attempt at assessing the net effects of reporting and auditing mandates on resource allocation at the industry level (see, e.g., Donovan et al. [2014], Leuz and Wysocki [2016], ICAEW [2016], Minnis and Shroff [2017], Roychowdhury, Shroff, and Verdi [2019] for calls for such research). Empirical evidence on these effects is key to understanding which among the many potential effects of financial‐reporting mandates dominate at the industry level.…”

Section: Introductionmentioning

confidence: 99%

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How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

Breuer

2021

J of Accounting Research

123

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This paper examines the impact of mandatory reporting and auditing of firms’ financial statements on industry‐wide resource allocation. Using threshold‐induced variation in the share of mandated firms in a given industry, I document that reporting mandates facilitate ownership dispersion in capital markets and spur competition in product markets. I, however, do not find that reporting mandates unambiguously improve the efficiency of industry‐wide resource allocation. With respect to auditing mandates, I find only that they impose a fixed cost on firms, deterring smaller entrants.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

Breuer

2021

J of Accounting Research

123

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“…A complete treatment of these literatures is outside the scope of this paper; seeDranove and Jin (2010), Ben-Shahar and Schneider (2014),Loewenstein et al (2014),Leuz and Wysocki (2016), andRoychowdhury et al (2019) for recent surveys of disclosure-related research.…”

mentioning

confidence: 99%

Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts

Hunt

Palmer

Zaliauskas

2019

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provided invaluable help with execution. We thank Margarita Alvarez-Echandi, Sam Hughes, Tammy Lee, and Lei Ma for their research assistance. This research was conducted in conjunction with the Financial Conduct Authority, where Adams, Hunt, and Zaliauskas were employed during the trials. The views expressed in this paper are those of the authors and not the Financial Conduct Authority, which has reviewed the paper for human subjects compliance and the release of confidential information. All errors and omissions are the authors' own. This RCT was registered in the American Economic Association Registry for randomized control trials under trial number AEARCTR-0004053. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w25718.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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“…First, financial reporting can facilitate investments in new projects and improve operating efficiency of existing assets‐in‐place by increasing opportunities of learning from other sources (Ferracuti and Stubben 2019, Roychowdhury et al. 2019). Managers may use competitors' financial information such as sales growth, profit margins, R&D expenses, SG&A expenses, and capital expenditures to evaluate the market conditions, the industry environment, and the competitors' product development plans as well as their cost management strategies (Bushman and Smith 2001, Chen et al.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Do Accounting Standards Matter for Productivity?

Banker

Huang

et al. 2021

Production and Operations Management

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In this study, we examine whether productivity shifts when accounting standards change. Using mandatory International Financial Reporting Standards (IFRS) as a shock to the accounting regime, we examine the changes in country‐level productivity. We find that mandatory IFRS‐adopting countries experience significant increases in total factor productivity (TFP) and labor productivity. The post‐adoption productivity improvements are greater for countries without IFRS convergence. Further, TFP increases more for countries that experience a larger increase in industry comparability. Taken together, the evidence suggests that the new IFRS accounting regime increases economic productivity via improving information environments and facilitating internal firm decisions.

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The Effects of Financial Reporting and Disclosure on Corporate Investment: A Review

Cited by 44 publications

References 198 publications

How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?

Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts

Do Accounting Standards Matter for Productivity?

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