Economic Significance in Corporate Finance

55 Pages Posted: 18 Sep 2020 Last revised: 15 Feb 2022

See all articles by Todd Mitton

Todd Mitton

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

Date Written: December 1, 2021

Abstract

Reporting the economic significance of findings in corporate finance has become increasingly common, but a review of the literature reveals shortcomings in typical reporting practices. Researchers can more effectively communicate the practical importance of findings by using standard measures of economic significance that are scaled by the standard deviation of the dependent variable, by providing all statistics necessary to calculate economic significance, and by providing benchmarks by which to evaluate the magnitude of economic significance. To support these objectives, I show why measures scaled by the standard deviation are preferable, and I provide benchmarks based on hundreds of established findings from the literature.

Keywords: economic significance, corporate finance, empirical methodology

JEL Classification: C18, C52, G30

Suggested Citation

Mitton, Todd, Economic Significance in Corporate Finance (December 1, 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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