Financial statement comparability and the usefulness of earnings: Some Canadian evidence

In this study, we investigate whether financial statement comparability enhances the usefulness of earnings, specifically their relevance and faithful representation, as asserted in the International Accounting Standards Board (IASB)’s conceptual framework. Thus far, researchers have documented various capital market benefits of comparability. However, the role of comparability in improving the usefulness of earnings has not yet been directly examined. Our study is motivated to address this question using data from Canadian firms in the post-International Financial Reporting Standards (IFRS) adoption period. The findings are consistent with our prediction and support the IASB’s claim, indicating that comparability enhances the decision-usefulness of earnings. These results are robust to several control factors, including industry membership, firm profitability, firm size, and leverage.