The Impact of Board Networks on Financial Statement Comparability

This paper investigates the effect of board interlock networks on financial statement comparability (FSC), using a sample of U.S. publicly traded firms from 1996 to 2023. While prior studies suggest that well-connected boards may enhance certain aspects of financial reporting quality, other evidence highlights the potential for negative spillovers and conformity pressures within interlocked networks. Addressing this tension, we find that firms with more well-connected boards exhibit lower comparability in their financial statements, with degree, betweenness, and eigenvector centrality showing statistically significant negative associations under the primary comparability specification (CompIND). Results for closeness centrality are consistently signed but statistically weaker. Evidence across cash-flow and accrual comparability is broadly consistent with the main findings, though the direction and significance of individual centrality measures vary across cash-flow comparability specifications. Our findings contribute to the literature by identifying board network centrality as a novel and influential determinant of financial reporting comparability.