Accounting Comparability and Common Owners

Abstract We examine the relationship between accounting comparability and common ownership. Accounting comparability can reduce information asymmetry between firms and investors by lowering information acquisition and processing costs. At the same time, greater comparability can reduce the private information advantages that sophisticated investors, such as common owners, exploit. Which of these opposing forces dominates is ultimately an empirical question. Using a sample of US firms for 1999–2021, we find that accounting comparability is positively associated with common ownership, particularly non‐transient common ownership. Further analyses indicate that this relation is driven by a reduction in information asymmetry and is significantly stronger among firms with weaker information environments.