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Financial statement comparability and managers’ use of corporate resources

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  • Jeong‐Bon Kim
  • Leye Li
  • Louise Yi Lu
  • Yangxin Yu

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.

Suggested Citation

  • Jeong‐Bon Kim & Leye Li & Louise Yi Lu & Yangxin Yu, 2021. "Financial statement comparability and managers’ use of corporate resources," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1697-1742, April.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:s1:p:1697-1742
    DOI: 10.1111/acfi.12642
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