Comparability and Cost of Equity Capital

Imhof, Michael J.; Seavey, Scott E.; Smith, David B.

doi:10.2308/acch-51710

Cited by 96 publications

(32 citation statements)

References 38 publications

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“…Lower information asymmetry induced by comparability also reduces the costs of capital (Imhof, Seavey, & Smith, 2017;Shane et al, 2014). Shane et al (2014) argue that higher comparability lowers underpricing near/around seasoned equity offerings (SOE), and there is a lower likelihood of losses from post-issue underpricing.…”

Section: Comparability and Tax Avoidancementioning

confidence: 99%

Financial statement comparability and corporate tax avoidance: evidence from China

Majeed

Yan

2019

Economic Research-Ekonomska Istraživanja

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This paper examines whether financial statement comparability (hereafter referred to as comparability) is associated with corporate tax avoidance. We document the negative relationship between comparability and tax avoidance. Our findings indicate that comparability reduces information asymmetry, which makes the monitoring of managerial activities more effective. In addition, comparable information may increase the risk of detection of aggressive tax strategies, which leads to reputational, regulatory and political risks. We further examine how analyst coverage and product market competition influence the relationship between comparability and corporate tax avoidance. The results show that analyst coverage substitutes for the effect of comparability on tax avoidance. However, we do not obtain any conclusive evidence that product market competition plays a complementary role to comparability in reducing tax avoidance. Our results are robust to the various measures of comparability and tax avoidance and alternative methodological techniques.

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Section: Comparability and Tax Avoidancementioning

confidence: 99%

Financial statement comparability and corporate tax avoidance: evidence from China

Majeed

Yan

2019

Economic Research-Ekonomska Istraživanja

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“…In particular, their measure captures the extent to which peer firms with similar economic events (proxied by past stock returns) report comparable financial statement outcomes (i.e., net income). This measure has been widely used in the prior literature (e.g., Chen et al, 2018; Imhof, Seavey, & Smith, 2017; Kim et al, 2016; Sohn, 2016; Zhang, 2018). The construction of DKV's measure involves three steps.…”

Section: Methodsmentioning

confidence: 99%

Accounting comparability and the value relevance of earnings and book value

Chen

Kurt

Wang

2020

J Corp Accounting Finance

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The value relevance of financial statements is of great significance to investors and standard setters. The present research examines whether accounting comparability among industry peers enhances the value relevance of earnings and book value. This is an important question because both the Financial Accounting Standards Board and the Securities Exchange Commission seek greater comparability in financial reporting. However, there is limited empirical evidence on how comparability affects the value relevance of accounting information in the United States. Our results show that accounting comparability increases the value relevance of earnings, but not book value. That is, when firms exhibit greater accounting comparability vis-à-vis industry peers, investors attach higher value to reported earnings. In terms of economic significance, the value relevance of earnings is 25.2% higher when accounting comparability is higher by one standard deviation. However, the incremental benefits of accounting comparability are attenuated when financial reporting opacity is high or when there exists an internal control material weakness over financial reporting. In contrast, comparability benefits are enhanced when an industry specialist auditor is employed. Our results are robust to using different model specifications.

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“…For instance, Kim et al [15] found evidence that expected stock price crash risk decreases with financial statement comparability. Imhof et al [16] suggested that greater financial statement comparability is associated with a lower cost of equity capital. To summarize, previous studies have generally found evidence that financial statement comparability results in favorable economic consequences for the capital market.…”

Section: Prior Research On Sustainable Earningsmentioning

confidence: 99%

Toward Sustainable Accounting Information: Evidence from IFRS Adoption in Korea

Lee

2019

Sustainability

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The harmonization of accounting standards has been an international trend in the past two decades. As of 2018, 144 of 166 profiled jurisdictions require the use of International Financial Reporting Standards (IFRS). Nevertheless, there is mixed evidence on the effect of IFRS on sustainable accounting information. This study examines whether IFRS adoption improves earnings sustainability, focusing on emerging markets. Specifically, it tests the effect of IFRS on earnings quality by comparing earnings management and financial statement comparability of Korean listed firms for the pre- and post-IFRS periods. The results show that firms report less managed earnings in the post-IFRS period than in the pre-IFRS period. Furthermore, the results suggest the enhancement of financial statement comparability in the post-IFRS period compared to the pre-IFRS period. In particular, this paper documents that the effect of IFRS on sustainable accounting information is more pronounced in competitive industries. Moreover, it shows that small firms benefit more from adopting IFRS. Overall, this study finds that IFRS adoption in Korea improves the overall sustainability of accounting information.

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Comparability and Cost of Equity Capital

Cited by 96 publications

References 38 publications

Financial statement comparability and corporate tax avoidance: evidence from China

Financial statement comparability and corporate tax avoidance: evidence from China

Accounting comparability and the value relevance of earnings and book value

Toward Sustainable Accounting Information: Evidence from IFRS Adoption in Korea

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