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Financial reporting quality and corporate innovation

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  • KoEun Park

Abstract

This paper examines the relationship of financial reporting to corporate innovation. Given the importance of a high‐quality information system and coordination to innovation, I predict a positive association between financial reporting quality and future innovation. My empirical evidence is consistent with this prediction. I also find some evidence that the positive association between financial reporting quality and innovation is more pronounced for firms with intensive internal research and development activities and for firms in competitive industries. The main findings are robust to using an instrumental variable approach as well as controlling for alternative explanations. I find that firms with high‐quality financial reporting transform investment inputs into greater innovation outcomes and firm value. This study provides additional insight into the role of financial reporting quality and its relation to the real economy.

Suggested Citation

  • KoEun Park, 2018. "Financial reporting quality and corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(7-8), pages 871-894, July.
    • Handle: RePEc:bla:jbfnac:v:45:y:2018:i:7-8:p:871-894
    DOI: 10.1111/jbfa.12317
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    Cited by:

    1. Nian Li & Chunling Li & Runsen Yuan & Muhammad Asif Khan & Xiaoran Sun & Nosherwan Khaliq, 2021. "Investor Attention and Corporate Innovation Performance: Evidence from Web Search Volume Index of Chinese Listed Companies," Mathematics, MDPI, vol. 9(9), pages 1-23, April.
    2. Kelly Huang & Brent Lao & Gregory McPhee, 2020. "Internal information quality and patent‐related innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 489-518, March.
    3. Zhang, Chengrui & Li, Zhaohong & Xu, Jiaqian & Luo, Yiyang, 2024. "Accounting information quality, firm ownership and technology innovation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Nguyen, Lily & Vu, Le & Yin, Xiangkang, 2020. "The undesirable effect of audit quality: Evidence from firm innovation," The British Accounting Review, Elsevier, vol. 52(6).
    5. Dongmin Kong & Jialong Wang & Yanan Wang & Jian Zhang, 2022. "Language and innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(1-2), pages 297-326, January.
    6. Bin Yan Ding & Feng Wei, 2022. "Executive resume information disclosure and corporate innovation: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3593-3610, December.
    7. Chen, Ru & Tong, Jamie Yixing & Zhang, Feida (Frank) & Zhou, Gaoguang (Stephen), 2021. "Do female directors enhance R&D performance?," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 253-275.
    8. Azmi, Wajahat & Hassan, M. Kabir & Houston, Reza & Karim, Mohammad Sydul, 2021. "ESG activities and banking performance: International evidence from emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    9. David K. Ding & Christo Ferreira & Vu Minh Ngo & Phuc V. Nguyen & Udomsak Wongchoti, 2024. "Corporate social responsibility and myopic management practice: Is there a link?," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 271-308, January.
    10. Mahfuz Chy & Ole-Kristian Hope, 2021. "Real effects of auditor conservatism," Review of Accounting Studies, Springer, vol. 26(2), pages 730-771, June.
    11. Hung-Wen Lin & Kun-Ben Lin & Jing-Bo Huang & Shu-Heng Chen, 2021. "Timely Loss Recognition Helps Nothing," Sustainability, MDPI, vol. 13(14), pages 1-24, July.
    12. Chen, Wanyi & Jin, Rong, 2023. "Does tax uncertainty affect firm innovation speed?," Technovation, Elsevier, vol. 125(C).

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