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Firm life cycle and financial statement comparability

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  • Biswas, Pallab Kumar
  • Habib, Ahsan
  • Ranasinghe, Dinithi

Abstract

This paper examines how financial statement comparability varies between firms in the mature stage of their life cycle and firms in other life cycle stages. We hypothesize that mature firms are inclined to produce financial statements that are comparable among their industry peers. Using a sample of U.S. listed companies from 1987 to 2019, we find evidence to support our hypothesis. We also find that this association between life cycle and comparability is moderated by information asymmetry. A battery of robustness tests validates our initial findings. We extend the financial statement comparability literature by providing evidence on a determinant of comparability. Our study provides insights to policymakers regarding the necessity to consider firm life cycle when designing financial accounting standards.

Suggested Citation

  • Biswas, Pallab Kumar & Habib, Ahsan & Ranasinghe, Dinithi, 2022. "Firm life cycle and financial statement comparability," Advances in accounting, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:advacc:v:58:y:2022:i:c:s088261102200027x
    DOI: 10.1016/j.adiac.2022.100608
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    More about this item

    Keywords

    Financial statement comparability; Firm life cycle; Information asymmetry; Free cash flows;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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