The Benefits of Financial Statement Comparability

Franco, Gus De; Kothari, S.P.; Verdi, Rodrigo S.

doi:10.2139/ssrn.1266659

Cited by 166 publications

(615 citation statements)

References 15 publications

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“…The dependent variable is the comparability of financial statements and the objective of this research is examining how such a measurement behaved in face of the regulatory flexibility that took place in Brazil within a time series from 2004 to 2012. To measure comparability, we adopted as a metrics the model similarity of the accounting function devised by DeFranco et al (2011). To test the behavior of the variable concerning the regulatory flexibility, we chose the panel data statistical approach.…”

Section: Methodsmentioning

confidence: 99%

“…DeFranco et al (2011) state that two companies have comparable accounting systems if, for the same type of economic event, they produce similar accounting outputs. This way of measuring comparability has a big advantage, because, unlike the indices of harmonization, which are measurements calculated having the accounting model inputs as a basis (it is needed to calculate an index for each accounting policy), the model of similarity is a measurement of output, i.e.…”

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

“…This way of measuring comparability has a big advantage, because, unlike the indices of harmonization, which are measurements calculated having the accounting model inputs as a basis (it is needed to calculate an index for each accounting policy), the model of similarity is a measurement of output, i.e. its number is a final measurement of comparability (DeFranco et al, 2011).…”

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

“…To operationalize the measurement of comparability in the model by DeFranco et al (2011) two pieces of information are required: profit and return. Profit represents the final product of the accounting system, where a large part of choices in a company is reflected concerning the recognition and measurement of economic events to which it is subject.…”

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

“…The model proposed by DeFranco et al (2011) has its rationale linked to the concept of comparability underlying the conceptual framework, i.e. comparability is the feature of accounting information that allows us to identify similarities and differences between the accounting functions of two or more companies (International Accounting Standards Board, 2010;Financial Accounting Standards Board, 2010).…”

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

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Manager's Discretionary Power and Comparability of Financial Reports: An Analysis of the Regulatory Transition Process in Brazilian Accounting

Ribeiro

Carmo

Fávero

et al. 2016

Rev. contab. finanç.

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This research aimed to directly evaluate the impact of the accounting regulatory flexibility movement on the comparability of financial reports. The country chosen for the analysis was Brazil, because it was one of the few countries in the world where a process of regulatory change from a completely rule-based standard with a strong link to tax accounting (Lopes, 2011) to a principle-based standard with greater need for decision by managers who prepare the financial reports took place. To measure comparability, the accounting function similarity model developed by DeFranco, Kothari and Verdi (2011) was used. The companies analyzed were all listed ones with full data for the period concerned having, at least, a pair company within the same economic activity sector. To obtain the research results, we adopted a panel data model where the years 2005 to 2012 were compared to the year 2004. The results obtained prove that, on average, there was no significant decrease in the comparability level within country during the regulatory transition period in Brazil. On the contrary, there was an increase in genuine comparability in the year 2012 when compared to 2004. In the model adjusted by stepwise, the years 2011 and 2012 had a significantly higher average comparability when compared to 2004. The results found corroborate other researches addressing the quality of accounting information (Collins, Pasewark, & Riley, 2012;Psaros & Trotman, 2004;Agoglia, Doupnik, & Tsakumis, 2011) and prove the superiority of the principle-based standard also over the comparability of financial reports. The main conclusion of this research is that increasing manager's discretionary power through flexibility of accounting standards does not decrease the comparability of financial reports.

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Section: Methodsmentioning

confidence: 99%

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

Section: Financial Statements I = Fi [Economic Events]mentioning

confidence: 99%

See 3 more Smart Citations

Manager's Discretionary Power and Comparability of Financial Reports: An Analysis of the Regulatory Transition Process in Brazilian Accounting

Ribeiro

Carmo

Fávero

et al. 2016

Rev. contab. finanç.

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Corporate social responsibility and financial statement comparability: Evidence from China

Wang

Zhang

2020

Corp Soc Responsibility Env

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This study examines the association between corporate social responsibility (CSR) performance and financial statement comparability. We use a sample of 7,462 firmyear observations from firms listed on China's stock exchanges from 2007 to 2016 and find that to some extent, firms with more positive CSR performance exhibit higher financial statement comparability, supporting the notion that managers have ethical concerns for stakeholder engagement. By contrast, firms with inferior adverse CSR performance exhibit significantly much lower financial statement comparability.Results are robust to alternative variable measurements and tests for endogeneity.Findings also suggest that CSR performance can be indicative of managerial opportunistic behaviours and the compliance incentive to follow accounting standards. K E Y W O R D S corporate social responsibility, financial disclosure quality, financial statement comparability, managerial opportunistic behaviour, stakeholder engagement

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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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The Benefits of Financial Statement Comparability

Cited by 166 publications

References 15 publications

Manager's Discretionary Power and Comparability of Financial Reports: An Analysis of the Regulatory Transition Process in Brazilian Accounting

Manager's Discretionary Power and Comparability of Financial Reports: An Analysis of the Regulatory Transition Process in Brazilian Accounting

Corporate social responsibility and financial statement comparability: Evidence from China

Accounting comparability and the value relevance of earnings and book value

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