Financial statement comparability and corporate cash holdings

Ahsan Habib*, Mostafa Monzur Hasan, Ahmed Al-Hadi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


This study examines the impact of financial statement comparability on corporate cash holdings. A greater degree of comparability lowers information acquisition costs, reduces the uncertainties associated with performance evaluation, and increases the overall quantity and quality of information available to corporate outsiders which, in turn, helps to ease the external financing constraints of the firm. Using a large US sample from 1981 to 2013, we find consistent evidence that financial statement comparability significantly reduces cash holdings of the firm. We also find that this relation is mediated by financing constraints, financial reporting quality and corporate governance. These findings are robust to alternative specification of comparability, cash holdings and to the alternative regression specifications and endogeneity tests. Our study contributes to the emerging research that stresses the importance of financial statement comparability.

Original languageEnglish
Pages (from-to)304-321
Number of pages18
JournalJournal of Contemporary Accounting and Economics
Issue number3
Publication statusPublished - 1 Dec 2017
Externally publishedYes


  • Cash holdings
  • Corporate governance
  • Financial reporting quality
  • Financial statement comparability
  • Financing constraints


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