کاش یه آدم مهربون ترجمه این مقاله رو داشت یعنی میشه؟؟؟؟؟؟؟؟؟!!!!!!!!!!!!( Comparability and Cost of Capital I. Introduction We investigate the information beneﬁts of ﬁnancial statement comparability by examining its effect on ﬁrm cost of capital. Hail, Leuz and Wysocki (2011) suggest that one beneﬁt of greater comparability is a lower cost of capital. However the relation between comparability and a company’s cost of capital has not been investigated empirically in the accounting research. In the FASB’s Concept Statement No. 2 Qualitative Characteristic of Accounting Information, comparability is deﬁned as “the quality of information that enables users to identify similarities in and differences between two sets of economic phenomena.... Information about a particular enterprise gains greatly in usefulness if it can be compared with similar information about other enterprises (FASB 1980, Con. 2 pp. 4-20).” One implication of this view of comparability is that more comparable information has greater usefulness for decision making. . Dechow, Ge and Strand (2010) indicate that information can be said to be decision relevant only in the context of a speciﬁc decision model. Understanding the relation between ﬁnancial statement comparability and cost of capital helps regulators and managers understand how more comparable information is useful for investor decision-making. We use the comparability measure proposed by De Franco, Kothari, and Verdi (2011) that considers the accounting system to be a “mapping” of information from economic events into ﬁnancial statements. Where stock returns proxy for the effects of economic events on a ﬁrm’s ﬁnancial statements, comparability increases as the similarity between the “mapping” of economic events (stock returns) into ﬁnancial statements (earnings) for two ﬁrms increases. This approach captures comparability from the perspective of ﬁnancial information users and contrasts with input-based deﬁnitions where companies are viewed to provide comparable ' ﬁnancial information because they are using similar accounting methods and principles (DeFond, Hu, Hung and Li, 2011).‘ De Franco et al. (2011) supply a clarifying example from Stickney and Weil (2006, p. 189) that provides insight into the decision usefulness attributes of comparability that may affect a company’s cost of capital. It states that “ratios, by themselves out of context, provide little information” and so it is important to have something to compare to when using ratios to gain insight into a ﬁrm’s worth. This example implies that comparability does not necessarily provide more information but rather provides investors with a context to better use available information for making economic decisions. Our study is important for several reasons. First comparability is an important concept in the FASB and the IASB conceptual frameworks, but how comparability is related to a ﬁrm’ cost of capital remains an open question. Past studies emphasize this link when outlining the potential beneﬁts from global convergence of accounting standards (e.g., Hail and Leuz and Wysocki 2011, p. 387). They argue that greater comparability can increase market liquidity and reduce ﬁrms’ costs of capital, but provide no empirical evidence to support this argument.2 Second, even though De Franco et al. (2011) suggest their comparability measure provides insight into improved decision usefulness of accounting data, they do not speculate about how their measure relates to a company’s cost of capital. They do, however, maintain that “information about comparable ﬁrms lowers the cost of acquiring information and increases the overall quantity and quality of infom1ation available about the ﬁrm” (De Franco et al., 2011: p. 897). This conclusion appears to be consistent with those found in past research investigating _ how information characteristics are associated with a lower cost of capital but suggests that there may be something more captured by comparability that is not captured by measures of information asymmetry. Third, Lambert et al. (2011) predict, and Armstrong et al. (2011) provide empirical evidence suggesting, that market perfection affects investors’ abilities to gather and use information. We extend this research to investigate how market perfection/imperfection impacts the relation between comparability and cost of capital and altematively, how comparability impacts the relation between information asymmetry and cost of capital, conditioned on market perfection/imperfection. These tests allow us to both isolate potential conditions under which comparability is linked to a ﬁrm’s cost of capital and to gage whether comparability diminishes information risk in determining a ﬁrm’s cost of capital. Our research design consists of three steps. First we investigate the unrestricted case of the relation between the De Franco et al. (2011) comparability measure and a ﬁrm’s cost of capital. This step is consistent with Hail, Leuz and Wysocki (2011) that suggests greater comparability is associated with a lower cost of capital. Consistent with past research, we expect an inverse relation between comparability and cost of capital. In the second step we sort our sample based on the level of competition for a ﬁrm’s shares (a proxy for market perfection) and focus on companies whose shares trade in highly imperfect markets. This is the environment that Lambert et al. (2012) and Armstrong et al. (2011) have shown to be consistent with the pricing of information asymmetry in the cost of capital because investors would otherwise be able to rely on information contained in security prices (Kyle et al l985).3 If the beneﬁts of comparability are also dependent on market perfection/imperfection environment, we expect the inverse relationship between the De Franco comparability measure and cost of capital to be stronger when equity markets are imperfect. In the third step we sort observations into subsamples based on equity market imperfection and examine whether comparability impacts the relation between information asymmetry and cost of capital. This last step is consistent with guidance found in past research (Armstrong et al. 2011 and Lambert, Leuz, and Verrecchia 2011) and allows us to investigate whether comparability affects the impact of information asymmetry on a ﬁrm’s cost ‘of capital. _ Our results are consistent with our expectations and imply that comparability’s effects on cost of capital are affected by the perfection\imperfection of the trading environment and are incremental to the effect of information asymmetry. Results from our ﬁrst step indicate comparability is inversely associated with cost of capital, suggesting it reduces investor information ‘risk. Results from our second step suggest the inverse relation between comparability and cost of capital is increasing in market imperfection. We ﬁnd the negative relation between comparability and cost of capital is strongest for ﬁrms with a low number of shareholders (a measure of market imperfection). This result is robust to an altemative measure of market perfection (low trading activity) and is economically as well as statistically signiﬁcant. Results from our third step suggest comparability is incremental to the impact of information asymmetry on ﬁrm cost of capital. For ﬁrms characterized by high information asymmetry and low public trading, ﬁnancial statement comparability at least partially reduces estimation risk to investors, leading to lower required rates of retum. This result is economically signiﬁcant as 3 Perfect competition refers to the scenario where demand curves are ﬂat, and assumes that the number of trades in a ﬁrm’s shares is inﬁnite (Hellwig, 1980; Shleifer, 1986).