Has Global Financial Reporting Comparability Improved?

Abstract

Motivated by ongoing worldwide efforts to improve the comparability of reported accounting numbers, I examine the temporal trend in global financial reporting comparability. While there is considerable regulatory interest in improving comparability, numerous frictions can limit the effectiveness of these efforts. Accordingly, I apply time-series comparability measures to a sample of the 36 largest economies, providing two key empirical insights. First, I confirm expectations of increasing comparability over 2002–2018. Second, I document that this increase in comparability primarily occurs in firms using local accounting standards, as opposed to those using global standards (defined as either US GAAP or IFRS). Additional analyses reveal that (i) firms using local standards are becoming more comparable to IFRS firms, but not to US GAAP firms, and (ii) comparability within global standards firms is not changing. Overall, the results reveal that comparability is indeed increasing over time—consistent with systematic regulatory efforts—but that this increase arises heterogeneously across firms, with the primary effects in recent years occurring in those applying local standards.