A Measure of Financial Statement Similarity

53 Pages Posted: 30 May 2019

See all articles by Stephen V. Brown

Stephen V. Brown

University of Connecticut - Department of Accounting

Guang Ma

National University of Singapore

Jenny Wu Tucker

University of Florida - Warrington College of Business Administration

Date Written: May 7, 2019

Abstract

We propose a measure of financial statement peer-to-peer similarity. The measure captures multiple dimensions of financial statements, considers both the presence and amount of a financial statement item, and therefore provides a holistic view to users who often need to compare a firm with its peers. The measure could be useful for screening firms for further scrutiny. One of such settings is regulatory enforcement of financial reporting. We find that firms with lower financial statement peer-to-peer similarity are more likely to receive comment letters from the SEC. This is even more the case after the SEC launched RoboCop in 2013. Overall, our study highlights the multidimensionality of financial statements and introduces a measure to capture such multidimensionality.

Keywords: financial statement similarity, comment letter, comparability, cosine similarity

Suggested Citation

Brown, Stephen V. and Ma, Guang and Tucker, Jenny Wu, A Measure of Financial Statement Similarity (May 7, 2019). Available at SSRN: https://ssrn.com/abstract=3384394 or http://dx.doi.org/10.2139/ssrn.3384394

Stephen V. Brown

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

HOME PAGE: http://www.stephenvbrown.com/

Guang Ma

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building
Singapore, 119245
Singapore
+65-66012838 (Phone)

Jenny Wu Tucker (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States
352-273-0214 (Phone)
352-392-7962 (Fax)

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