Digital Finance and Financial Statement Comparability: Evidence from China

Purpose: This study examines the relationship between digital finance and financial statement comparability. Design/methodology/approach: This study uses data from non-financial Chinese firms from 2011 to 2022. This study employs a pooled OLS regression method for hypothesis testing. However, the fixed effect model, two-stage least squares, and generalized method of moments are used to ensure the robustness of the results. Findings: This study finds that digital finance is positively associated with financial statement comparability. The relationship between digital finance and financial statement comparability is more pronounced in the presence of higher media coverage, analysts’ following, and in non-state-owned enterprises, but weaker when economic policy uncertainty is higher. The findings remain consistent with alternative measures of digital finance, omitted variables problems, and endogeneity issues. Practical implications: This study is expected to add significantly to the current literature in distinct ways: It supplements research on digital finance technology in firms with a different, micro-based approach and offers generalized evidence on the possible external governing role played by digital finance. Originality/value: While the benefits of digital finance, as well as the determinants of financial statement comparability, have been extensively studied in the literature, the effects of digital finance on financial statement comparability remain under-explored, especially in the context of a developing country with juggernaut development in digital finance, such as China.