The Relation Between Reporting Quality and Financing and Investment: Evidence from Changes in Financing Capacity
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Core_the relation.pdf
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Author(s)
Balakrishnan, Karthik
Core, John E.
Verdi, Rodrigo
Date Issued
March 2014
Journal
Journal of Accounting Research
Publisher
John Wiley & Sons, Inc
Citation
Balakrishnan, Karthik, John E. Core, and Rodrigo S. Verdi. “The Relation Between Reporting Quality and Financing and Investment: Evidence from Changes in Financing Capacity.” Journal of Accounting Research 52, no. 1 (March 2014): 1–36.
Version
Original manuscript
Abstract
We use changes in the value of a firm's real estate assets as an exogenous change in a firm's financing capacity to examine (1) the relation between reporting quality and financing and investment conditional on this change, and (2) firms’ reporting quality responses to the change in financing capacity. We find that financing and investment by firms with higher reporting quality is less affected by changes in real estate values than are financing and investment by firms with lower reporting quality. Further, firms increase reporting quality in response to decreases in financing capacity. Our findings contribute to the literature on reporting quality and investment, and on the determinants of reporting quality choices.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1111/1475-679X.12031
