Financial statement comparability and managers’ use of corporate resources

Jeong Bon Kim, Leye Li, Louise Yi Lu*, Yangxin Yu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)

Abstract

We examine the impact of financial statement comparability on managers’ use of corporate resources. Using the comparability measures of De Franco, Kothari, and Verdi as proxies for financial statement comparability, we find that, as comparability increases, corporate cash holdings are worth more to outside shareholders, capital expenditure contributes more to shareholder value, and corporate acquisitions made by the firm have a more favourable impact on shareholder value. We also find that higher comparability leads to both lower under- and overinvestment. Our results suggest that comparability facilitates investor monitoring of managers’ use of corporate resources, which enhances shareholder value.

Original languageEnglish
Pages (from-to)1697-1742
Number of pages46
JournalAccounting and Finance
Volume61
Issue numberS1
DOIs
Publication statusPublished - Apr 2021

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