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Article
Publication date: 11 October 2021

Mengyao Cheng

This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and…

Abstract

Purpose

This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and accruals between the firms.

Design/methodology/approach

Using 278,452 pair-year observations over the years 2003–2019, the author evaluates the research question using regression models.

Findings

Closeness in cash flows and closeness in accruals both increase accounting comparability and the effect of closeness in cash flows is greater. The effect of closeness in earnings is greater than the combined effects of closeness in cash flows and accruals. Earnings quality strengthens, while product closeness weakens, the effects of closeness in earnings and closeness in cash flows.

Originality/value

To the best of the authors’ knowledge, this study is the first to empirically test the link between the closeness in earnings components and accounting comparability. This study is also the first to examine cash flows versus accruals in the context of accounting comparability.

Details

Review of Accounting and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 15 October 2021

Maryam Seifzadeh, Mahdi Salehi, Mohammadhamed Khanmohammadi and Bizhan Abedini

This study aims to concern about the relationship between management managerial attributes (management entrenchment, narcissism and overconfidence of the chief executive…

Abstract

Purpose

This study aims to concern about the relationship between management managerial attributes (management entrenchment, narcissism and overconfidence of the chief executive officer, board effort and real and accrual earnings management) and comparability of financial statements listed firms on the Tehran Stock Exchange. In other words, this paper aims to answer the question that “whether managerial attributes contribute significantly to the comparability of financial statements or not”.

Design/methodology/approach

The multivariate regression model is used for hypothesis testing. The hypotheses were examined using a sample of 768 listed observations on the Tehran Stock Exchange during 2012–2017 and by using from the multivariate regression pattern based on panel data techniques and the random-effects model.

Findings

The obtained results show a significant and negative relationship between management entrenchment, real and accrual earnings management, comparability and the relationship between management narcissism, overconfidence and board effort and comparability of financial statements is positive and significant.

Originality/value

As the present study is the pioneer study on such topics in the emerging markets, it provides valuable information concerning the intrinsic and acquired features of the management for users, analysts and legal institutions with a considerable impact on the comparability of financial statements. Moreover, this study’s results contribute significantly to the development of science and knowledge in this field and fill the gap in the literature.

Details

Journal of Facilities Management , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-5967

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Article
Publication date: 18 November 2020

Mojtaba Golmohammadi Shuraki, Omid Pourheidari and Masoud Azizkhani

Type of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to…

Abstract

Purpose

Type of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to examine the association between accounting comparability (as a micro level characteristic), financial reporting quality (as a macro level characteristic) and audit opinions.

Design/methodology/approach

This study uses a multivariate regression analysis to tests it hypotheses to a sample of firms listed in Tehran Stock Exchange during 2015–2019. To measure accounting comparability, the authors use De Franco et al. (2011) model, and Hutton et al. (2009) model to measure financial reporting quality. The authors use type of audit opinion, and auditor's remarks (explanatory notes) as the measure for audit opinions.

Findings

The authors find a negative association between accounting comparability, and the proxies for audit opinion. The authors also find that a negative association between financial reporting quality and audit opinions. These results suggest that higher accounting comparability, and higher financial reporting quality (proxied by earnings quality) increases auditor tendency to issue unmodified audit opinion.

Originality/value

To the authors' best knowledge, this is the first study that empirically examines the association between accounting comparability, financial reporting quality and audit opinion. This study provides empirical support for the theoretical views on the association between financial reporting quality and audit opinion. The results could be of interest of both auditors and managers, especially in emerging capital markets, who seek to improve financial reporting quality.

Details

Asian Review of Accounting, vol. 29 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 23 November 2020

Ahmed Alhadi, Ahsan Habib, Grantley Taylor, Mostafa Hasan and Khamis Al-Yahyaee

The purpose of this paper is to examine the relation between financial statement comparability and corporate investment efficiency of a large sample of US firms.

Abstract

Purpose

The purpose of this paper is to examine the relation between financial statement comparability and corporate investment efficiency of a large sample of US firms.

Design/methodology/approach

The authors use a large sample of US-listed firms from 1981 to 2013. The authors use several econometric methods including ordinary least square, firms fixed effects and mediation effects regression. Sensitivity tests that include the use of alternative measures of both the dependent and independent variables provide results that are consistent with the authors’ baseline model results.

Findings

The authors find that financial statement comparability mitigates risks associated with both under-investment and over-investment. They also find that product market competition mediates the relation between financial statement comparability and investment efficiency. The authors consider this to be a function of a competitive environment, whereby firms normally disclose less private information. This in turn reduces the effect of financial statement comparability on investment efficiency. Conversely, where there are higher levels of product market competition, it is less likely that firms will under-invest. Their results are consistent with these predictions.

Originality/value

The authors contribute to this growing field of research by providing evidence that financial statement comparability does in fact improve firms’ investment efficiency. Findings enhance our understanding of the relation between investment efficiency and financial statement comparability which is likely to have flow-on effects in terms of financial reporting quality and firm value. This study also contributes to research that links agency theory to financial statement comparability through an analysis of moral hazard and adverse selection tenets, and how it leads to reduced levels of investment inefficiency in a firm.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 27 May 2020

Christelle Smith and Elmar R. Venter

This paper aims to investigate financial statement comparability in the extractive industry. This paper focuses on the extractive industry because International Financial…

Abstract

Purpose

This paper aims to investigate financial statement comparability in the extractive industry. This paper focuses on the extractive industry because International Financial Reporting Standards (IFRS) contain limited guidance on the accounting treatment for exploration and evaluation (E&E) costs and IFRS 6 – Exploration for and Evaluation of Mineral Resources allowed firms to continue with existing divergent accounting treatment of E&E costs.

Design/methodology/approach

The authors use data from Australia, a country that adopted IFRS in 2005 with a large extractive industry. They also compare changes in cross-country comparability around the IFRS adoption date between Australian firms and adopters relative to Australian firms and non-adopters to better isolate changes in comparability that are attributable to the adoption of IFRS from other sources that are not related to the adoption of IFRS. The authors measure comparability consistent with De Franco et al. (2011) where financial statements are comparable when two firms produce similar accounting amounts for similar economic events.

Findings

For non-extractive industry firms, the authors find the comparability of financial statements of Australian firms increased with other adopters and that this increase was relatively greater than the increase with non-adopter firms. This evidence is consistent with comparability benefits associated with the adoption of IFRS. However, for extractive industry firms, the authors do not find a significantly greater increase in the comparability of financial statements of Australian firms with adopters relative to the increase with non-adopters, suggesting that the increase is likely not associated with the adoption of IFRS. In additional analysis, they find that following IFRS adoption non-extractive Australian firms have greater within-country comparability relative to extractive Australian firms, while there was no difference in the pre-adoption period.

Originality/value

The evidence suggests that the divergent practices for E&E costs under IFRS 6 and the lack of an accounting standard that deals with matters relating to the extractive industry hinder the comparability of financial statements in this industry.

Details

Accounting Research Journal, vol. 33 no. 3
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 8 June 2020

Mohammadreza Mehrabanpour, Omid Faraji, Reza Sajadpour and Mohammad Alipour

The purpose of this study is to examine the impact of financial statement comparability as a qualitative feature of financial reporting on cash holdings and the mediating…

Abstract

Purpose

The purpose of this study is to examine the impact of financial statement comparability as a qualitative feature of financial reporting on cash holdings and the mediating role of disclosure quality and financing constraints in firms listed on the Tehran Stock Exchange (TSE).

Design/methodology/approach

Using panel data from 110 TSE-listed firms from 2011 to 2017 in Iran, this study uses the regression analysis to examine the research hypotheses. The first hypothesis examines the relationship between financial statements comparability and cash holdings and two other hypotheses examine the mediating role of financing constraints and disclosure quality in this relationship.

Findings

Based on pecking-order theory and institutional context of Iranian firms, the results show that financial reporting comparability has a significant negative impact on corporate cash holdings. The results also show that disclosure quality and financing constraints have no mediating role in the relationship between accounting comparability and cash holdings. The robustness tests with alternative measures of accounting comparability and cash holdings support the findings of this study.

Research limitations/implications

The limitations of this study are as follows: limited number of TSE companies that have necessary data to conduct research; and using the disclosure quality scores provided by TSE organization.

Practical implications

The findings suggest that creditors should consider the financial status and also the quality of financial reporting of companies, before granting credit to them. It is also recommended that regulators in the capital market publish the ratings of companies in terms of financial statement comparability alongside the disclosure ratings and a continuous regulatory oversight on companies.

Originality/value

To the best of the authors’ knowledge, this is the first empirical research on the effect of accounting comparability on the level of cash holdings that examines the mediating role of financing constraints in the context of Iran market as an emerging economy. Moreover, this is the first empirical research that studies the effect of disclosure quality on this relationship.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 3
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 4 May 2012

Vicky Cole, Joël Branson and Diane Breesch

The introduction of the IFRS in the European Union, and many other countries, has not eliminated the need for research concerning the comparability of financial…

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1875

Abstract

Purpose

The introduction of the IFRS in the European Union, and many other countries, has not eliminated the need for research concerning the comparability of financial statements. The IFRS still offers many options. Extensive theoretical literature exists concerning the definition of comparable financial statements and the factors that influence this comparability. This paper aims to investigate this issue.

Design/methodology/approach

The paper uses a survey of 426 individuals who use European IFRS financial statements.

Findings

This study shows that most of the respondents (67 per cent) interpret comparability as uniformity, that is, that all companies using the same accounting methods. Comparability of financial statements over time and of companies operating within the same industry are considered to be the most important types of comparability. Both types are jeopardised because of continuous changes in IFRS and the lack of industry specific guidance. Only 41 per cent of the respondents believe that all IFRS financial statements are comparable. Not only accounting methods used, but also judgements made by preparers and interpretation differences are viewed as important factors influencing the comparability of financial statements.

Research limitations/implications

As surveys are uncommon in accounting literature, often because of sampling problems, the validity of this research should be further improved by additional surveys or other empirical research approaches.

Originality/value

This study contributes to the research by determining which factors influence the comparability of financial statements according to the auditors, analysts and other users and what their view is on the comparability of financial statements.

Details

International Journal of Accounting & Information Management, vol. 20 no. 2
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 1 March 2000

Johan R. Christiaens

The purpose of this research is to examine the accounting output of the reformed financial accounting system of municipalities in Belgium, particularly in Flanders. For…

Abstract

The purpose of this research is to examine the accounting output of the reformed financial accounting system of municipalities in Belgium, particularly in Flanders. For the first time ever in Belgian governments, an accounting reform transferred from business accounting was imposed. The research hypothesizes that the level of material comparability of the accounting output is very poor in spite of the strict accounting regulations. The empirical results indicate that the annual accounts are actually incomparable in many respects and that these problems cannot be explained away by a lack of experience.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 12 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 6 August 2018

Aria Farah Mita, Sidharta Utama, Fitriany Fitriany and Etty R. Wulandari

The purpose of this paper is to examine the indirect effect of the International Financial Reporting Standard (IFRS) adoption in increasing the foreign investors…

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2211

Abstract

Purpose

The purpose of this paper is to examine the indirect effect of the International Financial Reporting Standard (IFRS) adoption in increasing the foreign investors’ ownership through the improvement of comparability of financial statements.

Design/methodology/approach

This study employs listed companies in 18 countries across Europe, Asia, Africa, and Australia with an observation period from 2003 to 2012. Unlike previous studies, this study uses a continuous variable to measure the level of IFRS adoption which is measured at the country level. This study includes countries that do not fully adopt the IFRS, partially adopt, make some delays in adoption or some modifications to IFRS.

Findings

The results show that the level of IFRS adoption has a positive effect on the comparability of financial statements. The level of IFRS adoption indirectly increases the foreign investors’ ownership through the comparability of financial statements. These results are consistent with proponents for IFRS adoption which argue that the adoption improves the comparability of financial statements that in turn attracts greater cross-border investment.

Research limitations/implications

The findings of this study need to be interpreted with caution due to limitations. Although this research provides a detail measurement on the IFRS adoption, this study only looks at three general items of difference in adopting the IFRS. “Differences in text” used in this research has not quantified detail differences for each adopted standards. Therefore, future research can use a more in-depth measurement of the IFRS adoption level that considers differences or exceptions of accounting treatment.

Practical implications

The results suggest that the standards setting bodies’ (IASB) strategy on promoting the IFRS and objectives to develop a standard that leads to increase the financial statement comparability have been achieved. This research shows that the IFRS adoption plays a role in ensuring the financial statement quality in terms of its comparability. It implies that the standard-setting bodies in every country, as one of the responsible institutions regulating the business environment, can be entrusted with a greater role in order to ensure better financial information quality.

Originality/value

This study introduces novel measurement that is more detailed in measuring the IFRS adoption level instead of applying the discrete variable approach (“adopt” and “not adopt”) performed by previous studies (DeFond et al., 2011; Tan et al., 2011; Lee and Fargher, 2010). This study does not only cover some EU countries but also covers some countries in Asia, Africa, and Australia, so it can be better at capturing the variation of the IFRS adoption outside the EU. This broader coverage will show the consistency of the benefits of IFRS adoption. This study is most closely related to that of DeFond et al. (2011). This research extends DeFond’s study with some important differences as follows: it uses output-based and firm-specific measurement of the comparability from DeFranco et al. (2011), which is deemed to be more appropriate because it represents the qualitative characteristics of financial statements from a user’s perspective, i.e., investors, who evaluate historical performance and predict future performance in their investment decisions; it uses a broader scope of institutional investors; and it covers IFRS adoption in countries outside the EU for a longer observation period.

Details

Asian Review of Accounting, vol. 26 no. 3
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 1 July 2018

Muhammad Ansar Majeed, Chao Yan and Muhammad Zubair Tauni

The purpose of this paper is to explore the effects of competitive pressure on financial statements’ comparability (comparability) by analyzing various dimensions of competition.

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1116

Abstract

Purpose

The purpose of this paper is to explore the effects of competitive pressure on financial statements’ comparability (comparability) by analyzing various dimensions of competition.

Design/methodology/approach

The authors study the effect of competition on comparability using the comparability measure of De Franco et al. (2011) and various proxies for competition, competition from existing/potential rivals and non-price competition (NPC).

Findings

This study documents that competition is positively associated with comparability, and this effect is more (less) pronounced for industry followers (leaders). The authors also document that competition from existing rivals enhances comparability, but competition from potential entrants does not. Moreover, NPC is also a significant determinant of comparability. Furthermore, the competition from existing/potential rivals plays no significant role in the production of comparable financial statements in state-owned enterprises. The results are robust to alternative measures of comparability and methodological approaches.

Originality/value

This study is the first empirical study that documents a new channel (comparability) through which competition affects financial statements. The findings support the argument that competitive pressure acts as a governance mechanism, disciplines management and increases comparability leading to lower information asymmetry (governance view). However, the findings contest the argument that higher competition motivates managers to withhold information (proprietary cost hypothesis). By examining the effect of state ownership, this study might also help to characterize the effects of changes in corporate objectives on managerial decisions related to financial reporting.

Details

Management Decision, vol. 56 no. 11
Type: Research Article
ISSN: 0025-1747

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