The determinants of accounting comparability around the world

Abstract

Purpose The purpose of this paper is to investigate country-level and firm-level determinants of within-country accounting comparability for 16 European Union countries plus the USA in the post-International Financial Reporting Standards adoption period. Design/methodology/approach The authors use ordinary least squares regression to test the hypotheses with a correction for heteroscedasticity. Findings The authors find that firms in countries with rules-based accounting, higher quality public auditor work environments, stricter enforcement of accounting standards and more reliance on equity-market financing have higher within-country comparability with each other. At the firm-level, the authors find that firms which are larger, engage in less earnings management, and have lower return-on-asset volatility have higher within-country comparability with each other. Research limitations/implications The authors use one measure of accounting comparability. Alternative measures of accounting comparability could test the hypotheses more completely. Practical implications The findings of the paper may help the regulators make more efficient policies to establish an efficient financial market within their country. Originality/value The paper is the first, to the authors’ knowledge, to identify country-level and firm-level determinants of within-country accounting comparability. It contributes to the accounting literature by completing the theory of international accounting comparability from the within-country perspectives, as prior literature focuses on the cross-country perspective of international accounting comparability.

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

“…Firm size, leverage, and profitability are considered firm characteristics that are commonly used among prior studies (e.g., Agyei-Mensah, 2013;Priharta & Rahayu, 2019;Ross et al, 2019;Soyemi & Olawale, 2019) as determinants of the quality of the financial statements which applies, also, to the comparability as one of the qualitative characteristics of the accounting information.…”

“…They are also often audited by Big 4 audit firms that are concerned with improving the quality of financial reports of their clients. Moreover, larger firms have more financial capabilities than small firms which enable them keeping more automated financial reporting process, and well-structured internal control systems (Agyei-Mensah, 2013;Priharta & Rahayu, 2019;Ross et al, 2019;Soyemi & Olawale, 2019). However, from the agency theory's perspective, larger firms have more agency problems which may negatively affect the quality of their financial statements.…”

“…Concerning profitability, from the signaling theory's perspective, firms achieving high profit will tend to disclose more detailed information and faster than unprofitable firms. Nevertheless, according to the positive accounting theory, firms may resort to earnings management to avoid reporting volatile profit across periods or increase the managerial compensation (Agyei-Mensah, 2013;Ross et al, 2019;Soyemi & Olawale, 2019). Moreover, Lobo et al (2018) suggest that firms with similar economic circumstances would achieve similar operating results, in turn, would have more comparable earnings.…”

“…To the best of the researcher's knowledge, prior studies conducted on this issue have focused on the firm-specific characteristics as control variables. However, firm characteristics are broadly used among prior studies (e.g., Agyei-Mensah, 2013;Priharta & Rahayu, 2019;Ross et al, 2019;Soyemi & Olawale, 2019) as determinants of financial statements' quality. Accordingly, from the viewpoint of the researcher, firm characteristics can interact with the audit style in enhancing firms' earnings comparability.…”

Los IFRS y la armonización contable material de los inventarios de las empresas colombianas cotizantes no financieras

“…Esta paridad se podría generar por exigencias del entorno legal, económico, de la industria particular en la que se desenvuelven las empresas o, especialmente, por las necesidades de integración de los mercados de valores (Chumaceiro y Hernández, 2012;young & zeng, 2015;Urdaneta, Pérez y Acurero, 2018;Cantillo y Rivero, 2019;Dhaliwal, He, Li & Pereira, 2019), además, dependería de aspectos como la fortaleza del proceso de emisión y aplicación de las normas contables, el nivel de exigencia de las auditorías independientes, el cumplimiento efectivo de la legislación comercial y el grado de protección de los inversionistas (Archibold et al, 2017;Ross, Shi & Xie, 2019;Cantillo y Rivero, 2019).…”