The Role of Financial Reporting in Resolving Uncertainty about Corporate Investment Opportunities

Abstract

This discussion of the survey of the literature on financial reporting and corporate investment by Roychowdhury et al. (2019) focuses on an area in this literature that has received less attention — how financial reporting helps managers allocate capital across investment opportunities within their firms in the presence of uncertainty. We discuss the theory on investment under uncertainty and offer suggestions for future research.

Keywords: financial reporting, corporate investment, uncertainty, information asymmetry

JEL Classification: M41, G31