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Financial statement comparability and corporate cash holdings

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  • Habib, Ahsan
  • Monzur Hasan, Mostafa
  • Al-Hadi, Ahmed

Abstract

This study examines the impact of financial statement comparability on corporate cash holdings. A greater degree of comparability lowers information acquisition costs, reduces the uncertainties associated with performance evaluation, and increases the overall quantity and quality of information available to corporate outsiders which, in turn, helps to ease the external financing constraints of the firm. Using a large US sample from 1981 to 2013, we find consistent evidence that financial statement comparability significantly reduces cash holdings of the firm. We also find that this relation is mediated by financing constraints, financial reporting quality and corporate governance. These findings are robust to alternative specification of comparability, cash holdings and to the alternative regression specifications and endogeneity tests. Our study contributes to the emerging research that stresses the importance of financial statement comparability.

Suggested Citation

  • Habib, Ahsan & Monzur Hasan, Mostafa & Al-Hadi, Ahmed, 2017. "Financial statement comparability and corporate cash holdings," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(3), pages 304-321.
    • Handle: RePEc:eee:jocaae:v:13:y:2017:i:3:p:304-321
    DOI: 10.1016/j.jcae.2017.10.001
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    More about this item

    Keywords

    Financial statement comparability; Cash holdings; Financing constraints; Financial reporting quality; Corporate governance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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