Accounting Seminar（2015-15）

Topic:Financial Reporting Quality and Productivity Dispersion

Speaker:Rebecca N. Hann(University of Maryland)

Time:Monday,15 June, 10:00-11:30 am

Location:Room 217, Guanghua Building 2

Organizer:Department of Accounting,MPAcc GSM, PKU

Abstract：

Prior research documents large, persistent differences in productivity across businesses, suggesting the presence of market frictions that impede the efficiency in which resources are allocated from low to high productivity firms. We posit that high-quality financial reporting can mitigate one such friction—information frictions arising from firms and market participants having asymmetry information about firms’ productivity. Using a large sample of firms in the manufacturing sector, we find that the sensitivity of exit as well as capital and labor growth to productivity is higher for firms in the higher-quality financial reporting industries. We further find that industries with higher-quality reporting tend to have smaller within-industry productivity dispersion, with this relation stronger for industries with a greater need for external capital. Finally, using the change in segment reporting standard (from SFAS 14 to SFAS 131) as an exogenous shock to the reporting environment, we find that after SFAS 131, industries with a larger change in the degree of reporting disaggregation experience a greater reduction in productivity dispersion. Taken together, these findings suggest that financial reporting quality has real effects at the macro level, with higher reporting quality mitigating information frictions, thereby facilitating more efficient reallocation of resources and hence reducing productivity dispersion.

Your participation is warmly welcomed!