Economic Significance in Corporate Finance.

This article examines the reporting practices of economic significance in empirical corporate finance research, focusing on regressions with six common dependent variables: profitability, firm value, leverage, investment, payouts, and cash holdings. A survey of 604 papers (954 regressions) published between 2000 and 2018 in top finance journals reveals that while reporting of economic significance has increased substantially, common practices often rely on measures scaled by the mean of the dependent variable, which have several theoretical and empirical shortcomings. The author argues that measures scaled by the standard deviation of the dependent variable are preferable due to their robustness to data transformations, outliers, specification searching, and negative values. The paper also highlights frequent omissions of necessary summary statistics and benchmarks in published work, proposing standardized benchmarks derived from hundreds of established findings and commonly used control variables to contextualize economic significance. The study concludes with recommendations for researchers to adopt standardized, robust measures scaled by the standard deviation, provide sufficient data for independent evaluation, and include benchmarks to improve the clarity and reliability of economic significance reporting in corporate finance.