Premium
Product differentiation and financial statement comparability
Author(s) -
Cheng Mengyao
Publication year - 2021
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22498
Subject(s) - comparability , product differentiation , financial statement , competition (biology) , product (mathematics) , business , accounting , economics , product market , microeconomics , mathematics , geometry , audit , combinatorics , cournot competition , ecology , incentive , biology
This study empirically examines whether and how product differentiation affects the comparability of financial statements. Product differentiation captures the dissimilarities in business environments and operations between a firm and its peers, which naturally affects the firm's accounting comparability. Product differentiation also represents an important dimension of product market competition, which may lead to either higher or lower financial statement comparability. Using a sample of 5351 non‐financial US firms over the period of 2000–2019, my results provide consistent evidence that product differentiation decreases financial statement comparability. The results on other dimensions of product market competition also consistently show that accounting comparability decreases as product market competition weakens.