Accounting comparability and relative performance evaluation by capital markets

Wu, Su‐Mei; Xue, Wenjie

doi:10.1016/j.jacceco.2022.101535

Cited by 10 publications

(5 citation statements)

References 26 publications

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“…Accounting comparability affects the monitoring role and the risk allocation role of capital markets and alleviates entrepreneurs' moral hazard by strengthening the price response to the relative accounting performance (Wu and Xue, 2023). However, earnings volatility and environmental uncertainty increase investment risk, and managers and auditors consider it as a risk factor in their assessments.…”

Section: Discussionmentioning

confidence: 99%

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

Arianpoor

Asali

2023

ARA

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PurposeThe present study investigated the impact of earnings volatility and environmental uncertainty on accounting comparability in an emerging economy and the moderating role of COVID-19 pandemic for the companies listed on Tehran Stock Exchange (TSE).Design/methodology/approachThe data about 181 companies during 2014–2021 were examined. In this study, accounting comparability was predicted for the firms' accounting systems and the coefficient estimates were calculated. The present study used the coefficient of variation of sales to capture sales volatility as the primary environmental uncertainty measure.FindingsThe results showed that both the earnings volatility and environmental uncertainty have a significant negative effect on accounting comparability, and that COVID-19 significantly increases the negative impact of earnings volatility and environmental uncertainty on accounting comparability. The hypothesis testing based on robust, GLS, GMM, GLM, OLS regressions and t+1 test confirmed these results.Originality/valueThe present study aimed to develop knowledge-providing benefits for companies about the accounting comparability and managing more efficient decisions. The present findings help investors to understand and evaluate the performance of firms more accurately especially in earnings volatility and environmental uncertainty conditions and in the wake of a pandemic crisis such as COVID-19.

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Section: Discussionmentioning

confidence: 99%

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

Arianpoor

Asali

2023

ARA

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“…Islam et al, (2023) added in this respect, that the study's conclusions should be taken into account by regulators when developing financial reporting standards since increasing comparability might lessen financial distress and have broader economic consequences. A highly comparable accounting system allows investors to accurately predict the difference between any two businesses' future cash flows, even when they are still unsure about each firm's cash flow (Wu and Xue, 2023). Moreover, greater accounting comparability raises CEO compensation that is both cash-and equity-based.…”

Section: -2 Advantages Of Comparabilitymentioning

confidence: 99%

“…The managers' capacity to manipulate earnings and the dispersion of their estimates is limited when financial statements are comparable (Rashidi Baghi and Zareei, 2022). A highly comparable accounting system allows investors to accurately predict the difference between any two businesses' future cash flows (Wu and Xue, 2023).…”

Section: Introductionmentioning

confidence: 99%

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

سلامة,

رمضان,

ابوزيد

2024

مجلة الاسکندرية للبحوث المحاسبية

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The purpose of this study is to investigate the effect of audit style on financial statements comparability. The term "audit style" is used to describe the distinct set of internal rules and operating procedures employed by each of the Big 4 audit firms to apply auditing standards and enforce accounting standards among its clients. Comparability is measured by how accruals and earnings structures of two businesses operating in the same industry are more similar. Firm size, leverage ratio, market to book ratio, sales revenue, sales growth, and cash flow from operations are used as control variables. The research sample consists of 30 Real Estate companies and 27 Food, Beverage and Tobacco companies listed on the Egyptian stock exchange from 2018 to 2022, resulting in a final sample of 1,410 firm-pair observations using stratified random sampling technique. The study provided evidence that audit style has a significant positive effect on financial statements comparability, as measured by the covariation in accruals and earnings. The findings show that there is higher comparability between firm-pairs in the same sector audited by the same Big 4 audit firm than those audited by different Big 4 audit firms. Moreover, improved comparability is found between firmpairs audited by Big 4 audit firms than those audited by non-Big 4 audit firms.

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“…Although investors remain uncertain about either firm's cash flow, a perfectly comparable accounting system enables investors to perfectly infer the difference between any two firms' future cash flows (Wu and Xue, 2023). Firms also appear to increase CEO equity-based compensation intensity and pay-performance sensitivity when their financial statements are Accounting comparability's impact on CEO plans more comparable.…”

Section: Ceo Incentive Plans and Accounting Comparabilitymentioning

confidence: 99%

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

Arianpoor,

Efazati

2023

ARA

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PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.

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Accounting comparability and relative performance evaluation by capital markets

Cited by 10 publications

References 26 publications

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

نمط المراجعة وقابلية القوائم المالية للمقارنة "دراسة تطبيقية علي الشركات المقيدة بالبورصة المصرية(باللغة الانجليزية)

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

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