Common Institutional Blockholders and Reporting Practices: Evidence from Accounting Comparability

This study investigates whether common institutional blockholders (common owners) affect the accounting comparability of their portfolio firms. We document that accounting comparability between a pair of industry peers increases with common ownership presence and intensity. Common owners’ demand for comparability is more pronounced i) when the firm pairs have higher operating uncertainty, ii) when their information environment is opaque, and iii) when they weigh more within the common owners’ portfolio. To address endogeneity concerns, we exploit financial institutions mergers as quasi-exogenous shocks to common ownership. Difference-in-differences tests confirm the positive association between common ownership and accounting comparability. We conclude that common owners are important capital market participants that create a demand for and have a significant impact on accounting comparability. To the extent that achieving higher comparability is an important goal in standard-setting, out study has implications for standard setters and regulators evaluating the determining factors of accounting comparability.