The Consequences of Financial Statement Comparability from the Perspective of Investors and Creditors with Emphasis on Role of Institutional Ownership

The general purpose of financial reporting is to provide financial information about the reporting entity that is useful for decisions making to actual and potential investors, lenders and other creditors about providing resources to the entity. This goal requires financial information to have qualitative characteristics. The Comparability is an enhancement qualitative characteristic of the usefulness of information and cause to better and more efficient investment decisions when evaluating alternatives. The purpose of this study is to investigate the implications of financial statement comparability from the perspective of investors and creditors with an emphasis on the moderating role of institutional ownership. To measure the comparability, three criteria of earnings comparability, operating cash flows comparability, and discretionary accruals comparability have been utilized. The sample of the study included 119 companies accepted in Tehran Stock Exchange during the years 2011- 2017. To test the research hypotheses, multiple regression has been used. The findings of the study show that A) The cash flow comparability has a significant effect on stock annual returns, and this effect is moderated by institutional ownership; B) The earnings comparability has a significant effect on stock return volatility, and this effect is moderated by institutional ownership; C) The earnings comparability and cash flow comparability have significant effects on trade credit, but institutional ownership didn’t moderate these effects.