Economic Significance in Corporate Finance

53 Pages Posted: 18 Sep 2020 Last revised: 13 Apr 2021

See all articles by Todd Mitton

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Date Written: February 17, 2021

Abstract

Reporting the economic significance of findings in empirical corporate finance has become increasingly common, but a review of the literature from 2000 to 2018 reveals problems with standard practice that make it difficult to judge the importance of reported results. Common problems include making unsubstantiated absolute claims of economic significance, using nonstandardized and unreliable measures of significance, and failing to report benchmarks for evaluating significance. To help address these problems, I define standardized measures of economic significance, show which measures are reliable, and provide benchmarks for economic significance based on established findings.

Keywords: economic significance, corporate finance, empirical methodology

JEL Classification: C18, C52, G30

Suggested Citation

Mitton, Todd, Economic Significance in Corporate Finance (February 17, 2021). Available at SSRN: https://ssrn.com/abstract=3667830 or http://dx.doi.org/10.2139/ssrn.3667830

Todd Mitton (Contact Author)

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-1763 (Phone)

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