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Economic Significance in Corporate Finance

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  • Todd Mitton

Abstract

Reporting the economic significance of findings in corporate finance has become increasingly common, but a review of the literature reveals shortcomings in typical reporting practices. Researchers can more effectively communicate the practical importance of findings by using standard measures of economic significance scaled by the standard deviation of the dependent variable, by providing all statistics necessary to calculate economic significance, and by providing benchmarks by which to evaluate the magnitude of economic significance. To support these objectives, I show why measures scaled by the standard deviation are preferable, and I provide benchmarks based on hundreds of established findings from the literature. (JEL C18, C52, G30).

Suggested Citation

  • Todd Mitton, 2024. "Economic Significance in Corporate Finance," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 13(1), pages 38-79.
    • Handle: RePEc:oup:rcorpf:v:13:y:2024:i:1:p:38-79.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfac008
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    More about this item

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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