Economic Significance in Corporate Finance
53 Pages Posted: 18 Sep 2020 Last revised: 13 Apr 2021
Date Written: February 17, 2021
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: Suggested Citation