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Prof. Luminita Enache
Associate Professor in Accounting
Haskayne School of Business
University of Calgary

Implementing new accounting standards requires substantial organizational resources, yet evidence on these costs and their real effects remains limited. Understanding these costs is critical for evaluating the net benefits of accounting standards and their distribution across firms. Focusing on the biopharmaceutical industry, we examine the adoption of ASC 606 (revenue recognition) and ASC 842 (lease accounting) in a setting where public and private firms compete in innovation. Using event-level data from BioMedTracker and a difference-in-differences design comparing matched public and private firms within the same therapeutic areas, we find that public firms slow innovation following implementation. Relative to private peers, they reduce progress updates and collaborative partnerships, shift resources from early- to later-stage projects, and experience declines in approvals and phase progressions alongside increases in suspensions and withdrawals. These effects are concentrated among firms with greater exposure to the standards, financially constrained firms, and earlier-stage firms. Placebo tests show no similar patterns. Results are robust to excluding vaccine drug classes and firms receiving COVID-19-related government funding. Job posting data further shows increased hiring of accountants and reduced hiring of scientists during implementation. Overall, the findings indicate that accounting standards can affect competitive dynamics and have real consequences for innovation.