Information Frictions and Productivity Dispersion : The Role of Accounting Information

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)223-250
Journal / PublicationThe Accounting Review
Volume95
Issue number3
Online publishedOct 2019
Publication statusPublished - May 2020

Abstract

Prior research documents large, persistent productivity dispersion even within narrowly defined industries, suggesting the presence of frictions that impede the efficient allocation of resources. In this paper we consider the role of information frictions. We posit that high-quality financial reporting with respect to firm productivity can mitigate information frictions and hence facilitate the efficient allocation of resources across firms. Using a large sample of firms in the manufacturing sector, we find evidence consistent with our prediction—industries with higher productivity informativeness tend to have smaller within-industry productivity dispersion. We further find that this relation is stronger in industries with greater dependence on external financing, suggesting that reporting quality affects allocation efficiency at least in part through the capital market channel. These findings suggest that the extent to which financial reporting is informative about productivity can affect resource allocation efficiency and hence have real effects at the macro level.

Research Area(s)

  • Financial reporting quality, Information frictions, Prodictivity dispersion, Resource allocation efficiency

Bibliographic Note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Information Frictions and Productivity Dispersion: The Role of Accounting Information. / Hann, Rebecca N.; Kim, Heedong; Wang, Wenfeng et al.
In: The Accounting Review, Vol. 95, No. 3, 05.2020, p. 223-250.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review