Structural Comparability of Financial Statements

53 Pages Posted: 8 Mar 2018 Last revised: 17 Apr 2018

See all articles by Elaine Henry

Elaine Henry

Stevens Institute of Technology - School of Business

Fang-Chun Liu

University of South Florida St. Petersburg

Steve Y. Yang

Stevens Institute of Technology

Xiaodi Zhu

New Jersey City University; Stevens Institute of Technology

Date Written: April 13, 2018

Abstract

Comparability enhances the usefulness of financial information. Prior research demonstrates a relationship between earnings-based measures of accounting-function comparability and properties of analysts’ forecasts. This study examines whether structural comparability – commonality in how financial statements communicate accounting results – mediates that relationship. We introduce a measure of the structural comparability of financial statements based on the information captured in the eXtensible Business Reporting Language (XBRL). Using a dataset of 7,797 firm-year observations from 2009 to 2015, our analysis indicates that structural comparability mediates the relation between accounting function comparability and analysts’ coverage, forecast accuracy, and forecast dispersion. Additional analysis shows a stronger mediation effect when structural comparability measures incorporate both material and less material items and an increase in the mediation effect as firms gain filing experience. Overall, this study contributes to a better understanding of the mechanism through which comparability affects users’ judgements and provides perspective on the impact of the SEC’s mandatory use of XBRL filing.

Keywords: financial statement comparability, semantic convergence, interoperability, XBRL

Suggested Citation

Henry, Elaine and Liu, Fang-Chun and Yang, Steve Y. and Zhu, Xiaodi, Structural Comparability of Financial Statements (April 13, 2018). Stevens Institute of Technology School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=3133324 or http://dx.doi.org/10.2139/ssrn.3133324

Elaine Henry (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Fang-Chun Liu

University of South Florida St. Petersburg ( email )

140 7th Ave S
St. Petersburg, FL 33701
United States

Steve Y. Yang

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

Xiaodi Zhu

New Jersey City University ( email )

2039 Kennedy Boulevard
Jersey City, NJ 07305-1597
United States

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

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