We re‐examine the cross‐sectional stock return predictability of innovative originality documented in the 2018 paper by Hirshleifer et al. and introduce two measures of patenting activity: patent existence and patent counts. As firms with zero patents have zero innovative originality, we conjecture and find a high correlation between patenting activity measures and innovative originality. The findings of Hirshleifer et al. do not hold when we control for patenting activity. Our results highlight that simple patenting activity measures capture a significant portion of innovative originality, and hence need to be adequately controlled for in future innovation studies.
This study examines the impact of IFRS 10 adoption on consolidated financial reports. Our evidence suggests that the new standard is associated with firms consolidating fewer subsidiaries and consolidating fewer subsidiaries with nonmajority ownership. The results also indicate that the effects of IFRS 10 adoption are associated with financial reporting incentives. Finally, our results suggest that post-IFRS 10, the value relevance of equity increased and the value relevance of profit decreased for firms reporting fewer subsidiaries. The findings are of particular interest to accounting standard setters who are currently undertaking their post-implementation review of the impact of IFRS 10 adoption.
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