Does Financial Statement Comparability Facilitate SEC Oversight?

This study examines the impact of cross-firm financial statement comparability on theregulatory oversight of financial reporting quality. Consistent with the notion that cross-firmcomparable accounting systems enhance the regulators' ability to evaluate financial reportingquality, we find that the SEC is more likely to issue a comment letter on 10-K filings of pooraccounting quality when a firm's financial reporting is highly comparable to that of its peer firms.Meanwhile, without highly comparable benchmark peers, the SEC's comment letter issuance hasno association with a filing firm's accounting quality. Further analysis reveals that the regulatorybenefits from financial statement comparability are more salient when the SEC suffers fromlimited monitoring resources. Overall, we provide novel evidence suggesting that higher financialstatement comparability improves the efficacy of the SEC's oversight of accounting quality byreducing the information costs associated with cross-firm comparisons