Consistency as a Means to Comparability: Theory and Evidence

• 成果类型: Article
• 署名作者: Fang, Vivian W.; Iselin, Michael; Zhang, Gaoqing
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4052
• 发表日期: 2022
• 页码: 4279-4300
• 关键词: financial statement consistency; comparability; Informativeness; information spillover; fundamental correlation; fundamental volatility

摘要

This paper studies financial statement consistency - the purported means to comparability - from an information perspective. We model consistency as firms' required propensity to apply common accounting methods to individual transactions and show that consistency creates information spillover through correlated measurements (spillover channel) while potentially reducing the informativeness of one's own report (standalone channel). The model generates two central predictions. First, optimal consistency decreases with a transaction's fundamental correlation as high correlation diminishes information gains via the spillover channel. Second, optimal consistency decreases with a transaction's fundamental volatility as high volatility exacerbates information losses via the standalone channel. Empirical evidence supports both predictions. Overall, this paper contributes a framework for studying comparability and draws useful policy implications.