The determinants of accounting comparability around the world

Abstract

PurposeThe 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/approachThe authors use ordinary least squares regression to test the hypotheses with a correction for heteroscedasticity.FindingsThe 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/implicationsThe authors use one measure of accounting comparability. Alternative measures of accounting comparability could test the hypotheses more completely.Practical implicationsThe findings of the paper may help the regulators make more efficient policies to establish an efficient financial market within their country.Originality/valueThe 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.