Journal of Accounting Research
Vol. 49 No. 4 September 2011
Printed in U.S.A.
The Beneﬁts of Financial Statement
GUS DE FRANCO,
RODRIGO S. VERDI
Received 25 October 2009; accepted 7 March 2011
Investors, regulators, academics, and researchers all emphasize the impor-
tance 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.
University of Toronto;
MIT Sloan School of Management. We appreciate the helpful com-
ments of Stan Baiman, Rich Frankel, Wayne Guay, Ole-Kristian Hope, Thomas Lys, Jeffrey Ng,
Shiva Rajgopal, Scott Richardson, Shiva Shivramkrishnan, Doug Skinner (the editor), Shyam
Sunder, Yibin Zhou, an anonymous referee, and workshop participants at Barclays Global In-
vestors, UC Berkeley, the University of Chicago, Columbia University, the University of Florida,
Harvard University, the University of Houston, the University of Iowa, MIT, Northwestern Uni-
versity, the University of Pennsylvania, Wharton, the University of Rochester, the University of
Waterloo, the 2008 London Business School Symposium, the 2009 AAA Annual Meeting, the
2009 Duke-UNC fall camp, and the 2009 University of Toronto Conference. We gratefully ac-
knowledge the ﬁnancial support of MIT Sloan and the Rotman School, University of Toronto.
Part of the work on this article was completed while Gus De Franco was a Visiting Assistant
Professor at the Sloan School of Management, MIT.
, University of Chicago on behalf of the Accounting Research Center, 2011