Structural Comparability of Financial Statements
53 Pages Posted: 8 Mar 2018 Last revised: 17 Apr 2018
Date Written: April 13, 2018
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
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