The Benefits of Financial Statement Comparability

The Benefits of Financial Statement Comparability 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

The Benefits of Financial Statement Comparability

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Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
©, University of Chicago on behalf of the Accounting Research Center, 2011
ISSN
0021-8456
eISSN
1475-679X
D.O.I.
10.1111/j.1475-679X.2011.00415.x
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Journal of Accounting ResearchWiley

Published: Sep 1, 2011

References

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