Accounting Comparability, ESG Reputational Risk and Corporate Investment Efficiency

Abstract

This study investigates the impact of accounting comparability on corporate investment decisions and ESG reputational risk management. Utilizing a Difference-in-Differences approach to account for exogenous shocks in national accounting standards, we present robust evidence that firms with greater comparability benefit from lower ESG reputational risk, reduced cost of capital, and increased investment activity. These firms also demonstrate a faster adjustment toward their target investment levels, particularly those with lower ESG risk. Our findings underscore the critical role of comparability in enhancing financial decision-making, boosting investment efficiency, and mitigating ESG-related risks, offering valuable insights for corporate governance and strategic decision-making.

Keywords: Accounting comparability, ESG reputational risk, Corporate Investment, Investment efficiency