Abstract
We examine how firms' accounting quality affects their reaction to monetary policy. The balance sheet channel of monetary policy predicts that the quality of firms' accounting reports plays a role in transmitting monetary policy by affecting information asymmetries between firms and capital providers. Consistent with this prediction, we find that accounting quality moderates firms' equity market response and future investment sensitivity to unexpected changes in monetary policy. Moreover, the former relation is amplified for firms with more growth opportunities and more financial constraints, further consistent with accounting quality moderating the transmission of monetary policy.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.