An Input-Based Measure of Financial Statement Comparability

Hoitash, Rani; Hoitash, Udi; Kurt, Ahmet C.; Verdi, Rodrigo S.

doi:10.2139/ssrn.3208928

Cited by 15 publications

(14 citation statements)

References 68 publications

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“…In the context of LSV, it is unclear that the DQ measure only captures disclosure quality. While greater disaggregation is consistent with better disclosure quality, it may also facilitate the comparability of financial statements (see, e.g., Hoitash et al 2018 for the development of a comparability measure that relies on financial statement disaggregation). Therefore, the findings in LSV using the DQ measure may capture comparability as well as disclosure quality effects.…”

Section: Existing State Of the Ifrs Literature And Conceptual Issuementioning

confidence: 99%

Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*

Siciliano

Venkatachalam

Naranjo

et al. 2021

Contemporary Accting Res

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This study adopts a two‐step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS‐adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long‐term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost‐benefit trade‐offs when considering disclosure changes in the future.

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Section: Existing State Of the Ifrs Literature And Conceptual Issuementioning

confidence: 99%

Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*

Siciliano

Venkatachalam

Naranjo

et al. 2021

Contemporary Accting Res

Self Cite

View full text Add to dashboard Cite

show abstract

“…Gross and Perotti (2017) summarized the literature on output-based measurements of accounting comparability and conclude the four advantages of an output-based approach relative to an input-based approach (e.g. Hoitash et al , 2018) including greater relevance to users, greater objectivity, easier to implement and greater accuracy. The large literature using an output-based approach (mainly the DKV measure) implies these advantages.…”

Section: Methodsmentioning

confidence: 99%

“…External users such as investors and creditors, who rely on financial statements to make decisions, require financial information to be comparable across firms so they can evaluate alternative opportunities. Driven by the introduction of a testable and convenient proxy for accounting comparability proposed by De Franco et al (2011) (henceforth DKV), many recent studies examine and show how accounting comparability improves information quality, which eventually benefits capital markets, including better valuation by analysts and credit rating agencies (DKV; Young and Zeng, 2015; Barth et al , 2018), more efficient assets allocation decisions (Chen et al , 2018), and lower risks such as credit risk (Kim et al , 2013; Fang et al , 2016; Hoitash et al , 2018), crash risk (Kim et al , 2016) and audit risk (Zhang, 2018).…”

Section: Introductionmentioning

confidence: 99%

The determinants of accounting comparability around the world

Ross

Shi

Xie

2019

ARA

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Purpose The purpose of this paper is to investigate country-level and firm-level determinants of within-country accounting comparability for 16 European Union countries plus the USA in the post-International Financial Reporting Standards adoption period. Design/methodology/approach The authors use ordinary least squares regression to test the hypotheses with a correction for heteroscedasticity. Findings The authors find that firms in countries with rules-based accounting, higher quality public auditor work environments, stricter enforcement of accounting standards and more reliance on equity-market financing have higher within-country comparability with each other. At the firm-level, the authors find that firms which are larger, engage in less earnings management, and have lower return-on-asset volatility have higher within-country comparability with each other. Research limitations/implications The authors use one measure of accounting comparability. Alternative measures of accounting comparability could test the hypotheses more completely. Practical implications The findings of the paper may help the regulators make more efficient policies to establish an efficient financial market within their country. Originality/value The paper is the first, to the authors’ knowledge, to identify country-level and firm-level determinants of within-country accounting comparability. It contributes to the accounting literature by completing the theory of international accounting comparability from the within-country perspectives, as prior literature focuses on the cross-country perspective of international accounting comparability.

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“…The use of similarity measures in the accounting literature has increased in recent years. Hoitash et al (2018) create a similarity measure they characterize as financial statement comparability. They calculate an annual comparability score based on pairwise overlaps in annual non-missing Compustat financial statement items in the same two-digit Standard Industrial Classification (SIC) industry.…”

Section: Similarity Measuresmentioning

confidence: 99%

Financial reporting uniformity: Its relation to comparability and its impact on financial statement users

Caylor

Chambers

Mutlu

2022

Business Fin & Account

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We explore the relation between financial reporting uniformity and comparability. We also examine the effect of uniformity on analyst coverage, analyst forecast accuracy and analyst forecast dispersion. We develop a Compustat‐based financial statement account uniformity measure based on the presentation of common financial statement line items. We define uniformity using a Jaccard similarity index where a firm's non‐missing Compustat data items are compared to a prototypical firm for that industry year. We emphasize the conceptual difference between uniformity and comparability, and our tests do not show a significant association between uniformity and output‐based accounting comparability. However, we find that the association between account uniformity and comparability becomes positive in high research and development firms, while it becomes negative in firms with higher managerial discretion. We explore the association between uniformity and information processing efficiencies, and we show that our uniformity measure is positively associated with analyst coverage. Furthermore, we partition our uniformity measure into separate income statement and balance sheet components. We find that income statement uniformity is associated with higher forecast accuracy and lower forecast dispersion, while balance sheet uniformity is associated with greater analyst coverage. Finally, we provide further support for these findings using an XBRL‐based uniformity measure.

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An Input-Based Measure of Financial Statement Comparability

Cited by 15 publications

References 68 publications

Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*

Economic Consequences of IFRS Adoption: The Role of Changes in Disclosure Quality*

The determinants of accounting comparability around the world

Financial reporting uniformity: Its relation to comparability and its impact on financial statement users

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