Do industry-specific accounting standards matter for capital allocation decisions?

Peter Fiechter, Wayne R. Landsman, Kenneth Peasnell and Annelies Renders

Journal of Accounting and Economics, 2024, vol. 77, issue 2

Abstract: This study examines whether the implementation of industry-specific accounting standards helps capital market participants in making decisions about providing capital to firms. We predict and find an, on average, increase in firms’ capital growth in years following implementation of the relevant industry standard. The increase in capital growth arises primarily from equity issuances and is attributable to the implementation of the standards rather than industry-specific trends or economic shocks. We explore heterogeneity in industry standards and find more pronounced effects for (i) industry standards that reveal new information, provide explicit guidance, or increase accounting uniformity, and (ii) small firms, firms with greater information asymmetry, and firms with greater capital constraints before implementation of the standards. We also find evidence consistent with two channels explaining the documented increase in capital flows: reduction of information asymmetry and increase in financial statement comparability.

Keywords: Capital flows; Industry-specific standards; Comparability; Transparency; Accounting uniformity; Stacked regression (search for similar items in EconPapers)
JEL-codes: E22 G21 G28 G32 K23 M41 M48 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:77:y:2024:i:2:s0165410123000940

DOI: 10.1016/j.jacceco.2023.101670

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