Campus Units

Accounting

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

12-16-2018

Journal or Book Title

Journal of Accounting, Auditing & Finance

DOI

10.1177/0148558X18814599

Abstract

Competitors often pay close attention to rivals’ financial reports. For firms with high levels of proprietary information, competition may increase the costs of public disclosure. Theory suggests that such costs, which we refer to as the proprietary costs of financial reporting, may lead to strategic financial reporting. We find that financial statement comparability is decreasing in the proprietary costs of financial reporting. Our results are robust to the use of alternative measures of comparability and alternative measures of proprietary costs of financial reporting. In addition, theory suggests that financial reports will contain stronger signals of managers’ private information when information asymmetry is high. We show that the negative relation between the proprietary costs of financial reporting and financial statement comparability is stronger for firms with poorer information environments. Together, our findings suggest that through the discretion afforded in Generally Accepted Accounting Principles (GAAP), managers of firms with high levels of proprietary information report in a way that reduces the comparability of their financial statements, particularly when information asymmetry is high.

Comments

This accepted article is published Imhof, M. J., Seavey, S. E., & Watanabe, O. V. (2018). Competition, Proprietary Costs of Financial Reporting, and Financial Statement Comparability. Journal of Accounting, Auditing & Finance. Doi: 10.1177/0148558X18814599. Posted with permission.

Copyright Owner

Sage Journals

Language

en

File Format

application/pdf

Published Version

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