The Benefits of Financial Statement Comparability

By Gus De Franco, S. Kothari, Rodrigo S. Verdi. 2011

795 citations recorded by the source corpus.

Investors, regulators, academics, and researchers all emphasize the importance of financial statement comparability. However, an empirical construct of comparability is typically not specified. In addition, little evidence exists on the benefits of comparability to users. This study attempts to fill these gaps by developing a measure of financial statement comparability. Empirically, this measure is positively related to analyst following and forecast accuracy, and negatively related to analysts’ dispersion in earnings forecasts. These results suggest that financial statement comparability lowers the cost of acquiring information, and increases the overall quantity and quality of information available to analysts about the firm.

View Paper: https://www.semanticscholar.org/paper/83140e8d1e59d440c0ba78334f741815781eb248

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Citations in the corpus

Does Mandatory IFRS Adoption Improve Information Comparability (2012, unknown): “…the measure of the similarity of accounting functions and information transfer,5 we find that there are no discernible comparability changes 3 De Franco et al. (2011) also develop another comparability measure that captures the similarity of two firms’ economic events and accounting functions…”
Mandatory IFRS Adoption and Financial Statement Comparability (2013, background): “Columns (3) and (4) present results using the DeFranco et al. (2011) proxy.”
Financial Statement Comparability and Expected Crash Risk (2016, unknown): “This table reports the results using the comparability measures based on earnings comovement as in De Franco et al. (2011).”
Financial statement comparability and credit risk (2013, unknown): “…of the relation between stock returns, a proxy for the valuation consequences of economic events during the period, and accounting numbers.2 Specifically, De Franco et al. (2011a) estimate regressions of earnings on stock returns for pairs of firms, denoted i and j, over the prior 16 quarters.”
Textual Analysis and International Financial Reporting: Large Sample Evidence (2015, unknown): “Second, De Franco et al. (2011) argue that comparability enhances the ability of investors and other financial statement users to understand”
Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis (2010, background): “Firms re considered to have comparable corporate reporting if, for a given set of economic events, these rms produce similar financial statements e.g., De Franco et al. 2009 .”
Readability of 10‐K Reports and Stock Price Crash Risk (2019, unknown): “ACCTCOMP is the yearly decile ranking (standardized to the range of 0 to 1) of the average of the firm’s top 4 comparability scores during the year (De Franco et al. 2011).”
Are IFRS-based and US GAAP-based accounting amounts comparable? $ (2012, unknown): “Finally, whereas De Franco et al. (2011) assesses comparability based on time-series relations, we assess comparability based on cross-sectional relations because we seek to determine whether IFRS and US GAAP accounting systems are comparable at the same point in time.”