Accounting Information Comparability And Capital Allocation Efficiency

Scholars have investigated some economic outcomes of comparability,such as that the comparability of accounting information can improve corporates’ operation efficiency,improve corporates’ disclosure level,optimize information environment,reduce the direct cost of collecting and processing information,and increase the quantity and quality of the information collected.Howerve,few research involve the effect of comparability on investment efficiency and the cost of equity capital.Since the impacts are related to capital allocation efficiency,and then are meaningful for corporate governance.Based on the information asymmetry theory and contagion effect,the paper investigate the effect of comparability on investment efficiency and the cost of equity capital using the sample of Chinese A-share listed companies from 2005 to 2016 and the comparability measure of De Franco et al.(2011).We find that firstly comparability will improve the investment efficiency(ie.decrease the level of overinvestment and increase the level of underinvestment),comparability can constrain the overinvestment of overconfident management and decrease the overinvestment causeed by management opportunistic behavior;comparability will release the level of underinvestment caused by financial constrain or moral harzzard.Secondly,comparability reduces the cost of equity capital.Further studies show that comparability strengths the effect of institutional investors and stock competition on the cost of equity capital.The paper provides more evidences on comparability’s economic outcome and enrichsh related literature.The conclusion is meaningful for standard setters and information users.