Using accounting measures of (in)tangibility for organizational classifications
Cardao-Pito, Tiago and Smith, Julia A. and da Silva Ferreira, Joao (2021) Using accounting measures of (in)tangibility for organizational classifications. Quantitative Finance and Economics, 5 (2). pp. 325-351. ISSN 2573-0134 (https://doi.org/10.3934/QFE.2021015)
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Abstract
We present an empirical test of a new measure to classify organizations according to the tangibility of product (output) flows delivered to customers. Our measure exhibits the empirical consequences of using standard industrial classifications to assume that firms within the same industry either share identical properties or sell homogeneous products. To illustrate the misleading findings that can result from these assumptions, we investigate whether prior literature on capital structure provides a sensible interpretation of organizational behavior, based as it often is on an assumption that all firms within a given industrial classification sell durable goods. In contrast to the product-market literature based upon the trade-off theory of capital structure, that would predict that firms selling physical goods will have proportionately less debt, in fact, when firms within industries are classified using our measure, we find to the contrary. Our intention is not to displace existing systems of industry classification but is, rather, to highlight the dangers of drawing conclusions from assuming homogeneity amongst firms which are formally registered within the same industry.
ORCID iDs
Cardao-Pito, Tiago, Smith, Julia A. ORCID: https://orcid.org/0000-0002-6186-1723 and da Silva Ferreira, Joao;-
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Item type: Article ID code: 76442 Dates: DateEvent13 May 2021Published9 May 2021AcceptedSubjects: Social Sciences > Commerce > Accounting Department: Strathclyde Business School > Accounting and Finance Depositing user: Pure Administrator Date deposited: 13 May 2021 13:53 Last modified: 04 Dec 2024 01:24 URI: https://strathprints.strath.ac.uk/id/eprint/76442