The Benefits of Financial Statement Comparability
Gus De Franco
University of Toronto - Rotman School of Management
Massachusetts Institute of Technology (MIT) - Sloan School of Management
Rodrigo S. Verdi
affiliation not provided to SSRN
March 14, 2011
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.
Number of Pages in PDF File: 54
Keywords: Earnings Quality, Analysts, Earnings Attributes
JEL Classification: G29, M41, M45, G34
Date posted: September 11, 2008 ; Last revised: March 15, 2011
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