Accounting comparability and corporate innovative efficiency

Justin Chircop, Daniel W. Collins, Lars Hele Hass, Nhat (Nate) Q. Nguyen

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We predict that a firm's greater accounting comparability with its industry peers facilitates its learning from those peer firms' research and development (R&D) investments, allowing that firm to have greater innovative efficiency. We estimate accounting comparability using pro-forma capitalized R&D earnings that link lagged R&D expenditures to future profitability employing the Almon (1965) distributed lag model. We find that greater accounting comparability leads to enhanced ability to predict future cash flows generated by R&D investments of peer firms. In the cross-section, we observe the relation between accounting comparability and innovative efficiency is stronger if peer firms exhibit higher accounting (accrual) quality and are themselves successful innovators. In sum, this study shows that a shared qualitative characteristic of accounting, namely accounting comparability, is positively associated with innovative efficiency.
Original languageEnglish
Pages (from-to)127-151
Number of pages25
JournalThe Accounting Review
Issue number4
Early online date13 Oct 2019
Publication statusPublished - 1 Jul 2020


  • accounting comparability
  • innovative efficiency
  • product similarity
  • product market competition

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    Chircop, J., Collins, D. W., Hass, L. H., & Nguyen, N. N. Q. (2020). Accounting comparability and corporate innovative efficiency. The Accounting Review, 95(4), 127-151.