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How Does Financial‐Reporting Regulation Affect Industry‐Wide Resource Allocation?
Author(s) -
BREUER MATTHIAS
Publication year - 2021
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12345
Subject(s) - audit , business , competition (biology) , resource (disambiguation) , resource allocation , industrial organization , capital allocation line , product market , product (mathematics) , affect (linguistics) , capital market , finance , accounting , monetary economics , economics , microeconomics , market economy , incentive , computer network , linguistics , philosophy , computer science , ecology , geometry , mathematics , biology
This paper examines the impact of mandatory reporting and auditing of firms’ financial statements on industry‐wide resource allocation. Using threshold‐induced variation in the share of mandated firms in a given industry, I document that reporting mandates facilitate ownership dispersion in capital markets and spur competition in product markets. I, however, do not find that reporting mandates unambiguously improve the efficiency of industry‐wide resource allocation. With respect to auditing mandates, I find only that they impose a fixed cost on firms, deterring smaller entrants.