On May 10th 2019, David Windisch (University of Graz) presented his current research topic "Measuring Accounting Comparability" (co-authored with Skylar DeTure - University of Texas at Austin and Elisabeth Plietzsch - University of Graz) at the WHU Research Seminar in Finance & Accounting.
Accounting researchers and Regulators are highly interested in the determinants and consequences of Accounting comparability. Existing measures of comparability, however, rely on stock return data as an input, making them unsuitable for many of the questions of interest to accounting researchers. The authors propose that an ideal measure of comparability would satisfy three criteria. First, an ideal comparability measure would rate two firms as having more similar Accounting if their reported earings resond to "true economic" performance in the same way. Second, an ideal measure of comparability would not rely on stock return data to identify the "true economic" performance of the firms, because doing so would presuppose the capital market consequences of accounting comparability that many researchers are interested in testing. Third, an ideal measure of comparability would not rely on "input" based information, such as a checklist of the specific accounting treatments used by individual firms, because doing so would presuppose the determinants of accounting comparability. They develop and estimate a structural model to produce a firm-Level measure of accounting comparability that meets the above three criteria. Their measure is distinct from the popular DeFranco et al. (2011) measure in that they do not rely on stock returns as an input.