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The Benefits of Financial Statement Comparability
Author(s) -
DE FRANCO GUS,
KOTHARI S.P.,
VERDI RODRIGO S.
Publication year - 2011
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2011.00415.x
Subject(s) - comparability , financial statement , accounting , earnings , measure (data warehouse) , financial statement analysis , business , construct (python library) , statement (logic) , quality (philosophy) , actuarial science , empirical evidence , economics , financial ratio , computer science , mathematics , political science , data mining , audit , combinatorics , law , philosophy , epistemology , programming language
ABSTRACT 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.