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The unintended consequence of financial statement comparability: evidence from managerial learning practices

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  • Jianghua Shen
  • Lingmin Xie
  • Zhimin Xie

Abstract

Comparable financial disclosure has well‐known benefits but also unintended consequences. This study identifies one unintended consequence of managerial learning. For a large sample of Chinese companies, we find that investment‐to‐price sensitivity declines with financial statement comparability, indicating that comparability discourages managers from learning from prices. Consistent with the learning explanation, this negative relation is stronger for growth firms and for firms operating in more concentrated industries, where managers rely more on market prices for their investment decisions. We further find a decrease in firm value for these two groups of firms. Overall, we document a negative real effect of comparability.

Suggested Citation

  • Jianghua Shen & Lingmin Xie & Zhimin Xie, 2022. "The unintended consequence of financial statement comparability: evidence from managerial learning practices," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3073-3106, September.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:3:p:3073-3106
    DOI: 10.1111/acfi.12882
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    Cited by:

    1. Wenjun Kuang, 2023. "Accounting comparability and the accuracy of management earnings forecasts in Japan," Discussion Papers in Economics and Business 23-07, Osaka University, Graduate School of Economics.

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