Financial statement comparability and corporate cash holdings. Issue 3 (December 2017)

• Record Type: Journal Article
• Authors: Habib, Ahsan; Monzur Hasan, Mostafa; Al-Hadi, Ahmed
• Is Part Of: Journal of contemporary accounting & economics. Volume 13:Issue 3(2017:Dec.)
• Page Start: 304
• Page End: 321
• Publication Date: 2017-12
• Subjects: Financial statement comparability -- Cash holdings -- Financing constraints -- Financial reporting quality -- Corporate governance; G30 -- G32 -- M41; Accounting -- Periodicals; Accounting -- Research -- Periodicals; Accounting -- Periodicals; Accounting; Accounting -- Research; Periodicals; 657.05
• DOI: 10.1016/j.jcae.2017.10.001
• Languages: English
• ISSNs: 1815-5669

Abstract

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.