Financial statement comparability and idiosyncratic return volatility

Ahsan Habib, Mostafa Monzur Hasan*, Ahmed Al-Hadi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This study examines the association between financial statement comparability and idiosyncratic return volatility (IRV). A greater degree of comparability lowers information acquisition costs, reduces the uncertainties associated with performance evaluation, and increases the overall quantity and quality of information available to corporate outsiders, which, in turn, helps investors to understand and evaluate the cash flow and performance of firms more accurately. Therefore, we hypothesize a negative association between financial statement comparability and IRV. Using a large US sample from 1981 to 2013, we show that financial statement comparability is associated with lower level of IRV significantly. We also find this association to be more pronounced in a poor information environment. This study contributes to the emerging research that stresses the benefits of financial statement comparability.

Original languageEnglish
Pages (from-to)383-413
Number of pages31
JournalInternational Review of Finance
Volume20
Issue number2
Early online date24 Aug 2018
DOIs
Publication statusPublished - 1 Jun 2020
Externally publishedYes

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