Financial Reporting Frequency and Corporate Innovation

Journal of Law and Economics, Forthcoming

47 Pages Posted: 2 Aug 2019 Last revised: 18 Sep 2020

See all articles by Renhui Fu

Renhui Fu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Arthur G. Kraft

City University London - Cass Business School

Xuan Tian

Tsinghua University - PBC School of Finance

Huai Zhang

Nanyang Technological University (NTU)

Luo Zuo

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: January 30, 2020

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.

Keywords: regulation, reporting frequency, innovation, managerial myopia, externality

JEL Classification: G14, G18, M41, M45

Suggested Citation

Fu, Renhui and Kraft, Arthur Gerald and Tian, Xuan and Zhang, Huai and Zuo, Luo, Financial Reporting Frequency and Corporate Innovation (January 30, 2020). Journal of Law and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3429228 or http://dx.doi.org/10.2139/ssrn.3429228

Renhui Fu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China
+862152301575 (Phone)

Arthur Gerald Kraft

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Huai Zhang

Nanyang Technological University (NTU) ( email )

Nanyang Business School
50 Nanyang Ave.
Singapore, 639798
Singapore
+65-6790-4097 (Phone)

Luo Zuo (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

349 Sage Hall
Ithaca, NY 14853
United States
607-255-4002 (Phone)

HOME PAGE: http://www.johnson.cornell.edu/faculty-research/faculty/lz352/

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