DOES ACCOUNTING COMPARABILITY MATTER TO THE EFFICIENCY OF A FIRM’S INVESTMENT? EVIDENCE FROM CHINA’S A-SHARE MARKET

Zhenxing Lin (), Jingran Wang (), Chintan Huang (), Lin Chen and Peigong Li ()
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Zhenxing Lin: School of Accounting, Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China
Jingran Wang: ��Sogang Business School, Sogang University, Seoul, South Korea
Chintan Huang: ��Department of Business Administration, Ming Chuan University, Taipei, Taiwan
Lin Chen: School of Accounting, Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China
Peigong Li: School of Accounting, Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China

The Singapore Economic Review (SER), 2024, vol. 69, issue 06, 1977-1994

Abstract: This study aims to investigate the role of accounting comparability in firm investment efficiency of firms in China. Using a sample of listed firms in China’s A-share market from 2005 to 2016, this study empirically categorizes the firms into two groups based on overinvestment and underinvestment. After implementing several tests including those for collinearity and heteroskedasticity, the primary results of the empirical models show that accounting comparability can only improve the efficiency of a company’s investment in terms of reducing the overinvestment and increasing the underinvestment through the impact of a financing constraint on the overinvestment and underinvestment. This study thus suggests that the Chinese authorities should take steps to ensure that firms increase the extent of their accounting comparability with other firms, thereby making their accounting statements more comparable not only in the same industry, but also in different industries in accordance with the official accounting regulations and by adopting the same definitions for accounting indicators.

Keywords: Accounting comparability; China’s A-share market; investment efficiency; overinvestment; underinvestment (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S021759082240001X

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