Comparability is a desirable qualitative characteristic of financial information and critical for financial statement users' ability to identify and understand similarities and differences in financial results among reporting entities. Yet, little research explicitly considers either the determinants or benefits of comparability because of difficulty in identifying and measuring the theoretical construct of comparability. Further, the widespread global adoption of IFRS, a relatively homogenous set of accounting standards, is expected to increase comparability among companies that operate in different national jurisdictions. However, prior studies that examine the average impact of mandatory IFRS adoption on comparability find mixed results. I hypothesized that the impact of mandatory IFRS adoption on comparability varies with managers' reporting incentives and differences between countries' domestic standards and IFRS. Using listed firms from 34 countries, I documented that comparability under non-IFRS domestic standards is higher in countries that provide strong reporting incentives (i.e. countries with strict enforcement regimes or high earnings transparency). Additionally, I found an increase in comparability following IFRS adoption (relative to a control sample of non-adopters) in countries that provide strong reporting incentives or with large domestic GAAP-IFRS differences. In contrast, I found evidence of a decrease following IFRS adoption (relative to a control sample of non-adopters) in countries with weak reporting incentives or with small domestic GAAP-IFRS differences. Finally, I showed that changes in comparability surrounding adoption are positively associated with changes in the quality of firms' information environments.

The current study aims to investigate empirically the main incentives for mandatory and voluntary risk reporting (MRR and VRR) across the USA, the UK and Germany, each of which has a unique approach towards risk reporting. While the UK approach encourages more voluntary risk reporting above imposing risk rules, the German approach formally requires firms to provide risk information in a certain place in their annual report narratives. The US approach is a compromise between these two approaches; it obligates and encourages firms to provide more information about their risks mandatorily and/or voluntarily, respectively. Investigating the incentives for risk reporting in such set of countries answers the calls of some prior research (e.g., Linsley and Shrives, 2006; Dobler, 2008; Dobler, Lajili and Zeghal, 2011) to deepen our understanding of what motivates firms to disclose their risks. To this end, computerised content analysis and multilevel analysis (MLA) on a large scale (compared with previous work e.g., Linsley and Shrives, 2005, 2006; Abraham and Cox, 2007) are utilised. The results are produced in four cumulative contexts through Chapters Six to Nine. These results are consistent with managers’ incentives theories (discussed in Chapter Two) and prior risk reporting literature (discussed in Chapter Three and Chapter Four). Based on 15 firms in each country during 2007 and 2008, multivariate analysis of variance (MANOVA) results reveal significant differences between a firm’s risk levels and its risk disclosure levels across the USA, the UK and Germany. The correlation results indicate that these differences are statistically correlated, supporting the main argument of the current study that differences in a firm’s risk levels should be reflected in their risk reporting practices (Chapter Six). Based on 1160 firm-years of non-financial firms of the FTSE all share index over 2005-2008, linear mixed model (LMM) results document that firms with higher levels of systematic and financing risks are likely to exhibit significantly higher levels of aggregated and voluntary risk reporting, whereas firms with high variability of stock returns or lower levels of liquidity are likely to exhibit significantly lower levels of aggregated and voluntary risk reporting. The current study also finds, however, that MRR is associated significantly and positively with firm size rather than with risk levels. The results also indicate that managers of firms exhibiting greater compliance with UK risk reporting regulations have greater incentives to disclose voluntary risk information (Chapter Seven). When the study extends the scope to the other two countries, different patterns of relations are found. Based on 1270, 1410 and 1005 firm-year observations over 2005 to 2009 in the USA, the UK and Germany, respectively, repeated measures multilevel analysis (RMMLA) results suggest that, in the USA, MRR is more sensitive to firm risk levels (total, systematic and liquidity risks) than is VRR, which is more correlated to other firm characteristics. The UK results suggest that VRR is more sensitive to firm risk levels (systematic and liquidity risks) than is MRR, which is dominated by firm size, among other firm characteristics. In Germany, however, both MRR and VRR are significantly related to risk levels (total, systematic, un-systematic, financing and liquidity risks) (Chapter Eight). Based on 3685 firm-year observations during the period between 2005 and 2009, and concerning both firm- and country-level analyses, repeated measures multilevel analysis (RMMLA) results support that variations in MRR can be attributed to differences in the legal systems (country characteristics) and in firm size (firm characteristics). The variations in VRR are more associated with firm characteristics, especially a firm’s risk levels across the USA, the UK and Germany (Chapter Nine). These results have many implications and support the respective regulatory approach adopted within each country by interpreting the extent to which either MRR or VRR is more or less sensitive to underlying risks.

Yes / This paper provides a wide-ranging and up-to-date (1997-2016) review of the archival empirical risk-reporting literature. The reviewed papers are classified into two principal themes: the incentives for and/or informativeness of risk reporting. Our review demonstrates areas of significant divergence in the literature specifically: mandatory versus voluntary risk reporting, manual versus automated content analysis, within-country versus cross-country variations in risk reporting, and risk reporting in financial versus non-financial firms. Our paper identifies a number of issues which require further research. In particular we draw attention to two: first, a lack of clarity and consistency around the conceptualization of risk; and second, the potential costs and benefits of standard-setters’ involvement

In December 2017, Congress enacted the Tax Cut and Jobs Act (TCJA), which transitioned the U.S. to a quasi-territorial tax system and reduced incentives for U.S. multinational firms to invest overseas. Although prior studies find that the U.S. repatriation tax motivates firms to reinvest earnings offshore, they do not differentiate between investment outcomes attributable to tax deferral and financial reporting motives. I investigate the effect of financial reporting incentives to designate foreign earnings as indefinitely reinvested (IRFE) under APB 23 on foreign investment. Using a sample of U.S. multinational firms from 2007-2015, I decompose reported IRFE into a component based on investment and tax incentives to invest overseas (predicted IRFE), and a residual component that captures financial reporting incentives (excess IRFE). I find that excess IRFE are positively correlated with a history of benchmark-beating and CEO equity incentives. Excess IRFE, but not predicted IRFE, are significantly negatively associated with future foreign pretax ROA, especially relative to an estimated benchmark ROA. An increase in excess IRFE of one percent of assets is associated with a cumulative reduction of approximately 66 to 79 basis points in foreign pretax ROA and foreign ROA gap over the next three years. Among a set of privately owned firms, which face reduced reporting incentives, excess IRFE is not associated with future foreign profitability. Moreover, excess IRFE is associated with greater total cash holdings and foreign short-term investments than predicted IRFE. These results suggest that financial reporting incentives play a significant role in the accumulation of foreign earnings abroad and have negative profitability consequences.