Financial statement comparability and expected crash risk ☆

Research paper by Jeong-Bon Kim, Leye Li, Louise Yi Lu, Yangxin Yu

Indexed on: 18 Mar '16Published on: 11 Jan '16Published in: Journal of Accounting and Economics


This study examines the impact of financial statement comparability on ex ante crash risk. Using the comparability measures of De Franco et al. (2011), we find that expected crash risk decreases with financial statement comparability, and this negative relation is more pronounced in an environment where managers are more prone to withhold bad news. We also provide evidence that comparability can mitigate the asymmetric market reaction to bad versus good news disclosures. Our results suggest that financial statement comparability disinclines managers from bad news hoarding, which reduces investors׳ perceptions of a firm׳s future crash risk.