Events

We propose a measure of financial statement peer-to-peer similarity, which reflects the degree to which firms in similar businesses report financial statement items that exhibit similar economic relations. Our measure captures multiple dimensions of financial statements and therefore provides a holistic view to users who compare a firm with its peers. We identify one setting in which the concept of financial statement similarity is arguably used—regulation enforcement. We find a negative association between a firm’s financial statement peer-to-peer similarity and its likelihood of receiving a comment letter from the SEC. This result suggests that when firms stand out, they are more likely to be scrutinized. We find that this is even more the case after the SEC’s launch of RoboCop in 2013. Overall, our study highlights the multidimensionality of financial statements and the consequences of standing out among peers in financial statement relations.