Financial Statement Comparability and the Informativeness of Stock Prices About Future Earnings

Jong Hag Choi, Sunhwa Choi, Linda A. Myers, David Ziebart

Research output: Contribution to journalArticlepeer-review

96 Scopus citations

Abstract

We find that financial statement comparability enhances the ability of current period returns to reflect future earnings, as measured by the future earnings response coefficient (FERC). This suggests that comparability improves the informativeness of stock prices and allows investors to better anticipate future firm performance. In addition, using both the FERC and stock price synchronicity tests, we find that comparability increases the amount of firm-specific information (rather than market/industry-level information) reflected in stock prices. Analysts play an important role in improving stock price informativeness by producing more firm-specific information when comparability is high. These findings suggest that comparability lowers the costs of gathering and processing firm-specific information.

Original languageEnglish
Pages (from-to)389-417
Number of pages29
JournalContemporary Accounting Research
Volume36
Issue number1
DOIs
StatePublished - Mar 1 2019

Bibliographical note

Publisher Copyright:
© CAAA

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Financial Statement Comparability and the Informativeness of Stock Prices About Future Earnings'. Together they form a unique fingerprint.

Cite this