Comparability of Accounting, Quality of Financial Reporting and Pricing Efficiency of Optional Accruals

 This study examines the relationship between accounting comparability and the quality of financial reporting and the pricing efficiency of discretionary accruals, taking the view that comparability improves the information environment and not only enhances the ability of managers to accurately assess liabilities, it also improves investors' understanding of commitments. The investigation companies included 71 companies during the years 2012 to 2019. In this study, Di Franco's (2011) model for accounting comparability, Kotari et al. (2005) and Kaznik's (1999) models for financial reporting quality, and McNichols' (2002) model for accruals were used. The findings showed that increasing the comparability of financial statements reduced the absolute value of accruals and the lower the amount, the higher the quality of financial reporting. Overall, the obtained results revealed that comparability is associated with higher quality financial reporting, as comparability improves the accrual estimation process and the ability to signal future performance. Further, it was concluded that accountability comparability has a negative relationship with the pricing efficiency of optional accruals. In other words, the higher comparability of financial statements in the previous year has increased the perception of users regarding the financial statements of pricing of accruals. Accordingly, the more negative the coefficient of the variable, the higher the understanding of investors. We also found that when comparability was greater, the investors did not respond so strongly to optional accruals.