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Financial Reporting Frequency and Corporate Innovation

Author

Listed:
  • Renhui Fu
  • Arthur Kraft
  • Xuan Tian
  • Huai Zhang
  • Luo Zuo

Abstract

We examine how the regulation of financial reporting frequency affects corporate innovation. We use a difference-in-differences approach based on a sample of treatment firms that experience a change in their reporting frequency and matched industry peers and control firms whose reporting frequency remains unchanged. We find that higher reporting frequency significantly reduces treatment firms’ innovation output but find no evidence that the net externality effect on industry peers is statistically significant. Together, our results are consistent with the hypothesis that frequent reporting induces managerial myopia and impedes corporate innovation.

Suggested Citation

  • Renhui Fu & Arthur Kraft & Xuan Tian & Huai Zhang & Luo Zuo, 2020. "Financial Reporting Frequency and Corporate Innovation," Journal of Law and Economics, University of Chicago Press, vol. 63(3), pages 501-530.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/708706
    DOI: 10.1086/708706
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    Cited by:

    1. Zhang, Chengrui & Li, Zhaohong & Xu, Jiaqian & Luo, Yiyang, 2024. "Accounting information quality, firm ownership and technology innovation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 93(C).
    2. Biehl, Henrike & Bleibtreu, Christopher & Stefani, Ulrike, 2024. "The real effects of financial reporting: Evidence and suggestions for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    3. Dongmin Kong & Chen Lin & Lai Wei & Jian Zhang, 2022. "Information Accessibility and Corporate Innovation," Management Science, INFORMS, vol. 68(11), pages 7837-7860, November.
    4. Haga, Jesper & Högholm, Kenneth & Sundvik, Dennis, 2022. "Peer firms’ reporting frequency and stock price synchronicity: European evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    5. Li, Guoxing & Yeh, Yin-Hua, 2023. "Western cultural influence on corporate innovation: Evidence from Chinese listed companies," Global Finance Journal, Elsevier, vol. 55(C).
    6. Hedy Jiaying Huang & Ahsan Habib & Sophia Li Sun & Ying Liu & Huiting Guo, 2021. "Financial reporting and corporate innovation: a review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5439-5499, December.
    7. Marks, Joseph M. & Shang, Chenguang, 2024. "Business seasonality and stock liquidity," Journal of Financial Markets, Elsevier, vol. 67(C).
    8. Tan, Yongxian & Tian, Xuan & Zhang, Xinde & Zhao, Hailong, 2020. "The real effect of partial privatization on corporate innovation: Evidence from China's split share structure reform," Journal of Corporate Finance, Elsevier, vol. 64(C).
    9. Koga, Yuya & Yamaguchi, Tomoyasu, 2023. "Does mandatory quarterly reporting induce managerial myopic behavior? Evidence from Japan," Finance Research Letters, Elsevier, vol. 56(C).
    10. Sun, Yanyang & Chen, Yu & Wu, Wenruo, 2024. "Short-term success and long-term failure? The case of GDP growth targets and corporate innovation," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).

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