Financial Statement Comparability and Harmonization of Accounting Standards

Abstract

This paper examines whether accounting standard harmonization increases financial information comparability across countries. Firstly comparability is defined and linked statistically to firm value within two companies' sequential information sharing framework. Afterwards, the prediction that a company that has not announced earnings responds strongly to the announcement of earnings ofa foreign company when the two report under similar rather than separate accounting standards is tested empirically. The evaluation of abnormal volume and price responses for a worldwide sample of companies complements this prediction.