Has global financial reporting comparability improved?
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Motivated by ongoing worldwide efforts to improve the comparability of reported accounting numbers, this study examines the temporal trend in global financial reporting comparability and the factors that explain its variation. Despite regulatory interest in improving comparability, numerous frictions can limit the effectiveness of these efforts; examples include firm-specific incentives, investor protections, regulation, and enforcement. Using a broad cross-country sample focusing on the largest economies during 2000 to 2014, I first develop a firm-level measure of global financial reporting comparability. Next, I document—consistent across numerous specifications—that comparability is increasing over the sample period. Finally, I provide evidence of predictable cross-sectional variation: the increase in comparability is greater for firms that are smaller, using local GAAP, or domiciled in countries with weaker regulation and reduced for firms that are less profitable or have higher information asymmetry. Overall, the results are consistent with comparability increasing over time reflecting systematic regulatory efforts and/or increasing economic integration—with the increase driven by firm- and country-level characteristics.