| Summary: | AbstractThe present study aims to determine the effect of financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. To test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 1389 to 1397. In order to test the research hypotheses, a multivariate regression model and combined data have been used. The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce.Keywords: Financial statement comparability, Financial reporting quality, Idiosyncratic return volatility IntroductionOne of the main topics of the financial markets that has attracted the attention of capital market researchers is the discussion of stock return volatility. The stock returns volatility into two components: systematic and idiosyncratic. The part of the volatility that is uncontrollable and is caused by external factors is called systematic volatility. Moreover, idiosyncratic return volatility reflects the company's idiosyncratic return volatility, which is mainly derived from the company's activities and is independent of capital market volatility. The idiosyncratic return volatility has important applications such as portfolio diversification, active portfolio management, the relationship between risk and reward of managers, managers 'reward policies, and valuation of employees' stock authority. Hence, it is crucial to examine the factors affecting it. Uncertainty or lack of accurate and correct forecasting of future cash flows and firm performance causes idiosyncratic return volatility. On the other hand, the ability to compare financial statements by assisting users of financial statements in predicting and accurately forecasting the future cash flow and performance of the company affects the idiosyncratic return volatility. The ability to compare financial statements improves the information environment, increases the quality of financial reporting, and reduces information asymmetry. These capabilities help investors to better understand and evaluate the company's cash flows and performance, which reduces idiosyncratic return volatility. However, poor financial reporting quality prevents investors from properly evaluating the company's performance. This increases uncertainty about the company's performance and the consequent idiosyncratic return volatility. In the presence of poor financial reporting quality, the role of comparability of financial statements in the decision-making process becomes more important. The comparability of financial statements allows investors to compare the quality and performance of companies through better comparisons with similar companies furthermore, it is expected that when the quality of financial reporting is poor, the negative relationship between comparability of financial statements and idiosyncratic return volatility is stronger. Previous studies in Iran have examined the factors affecting idiosyncratic return volatility. Moreover, these studies have examined various factors such as financial reporting quality, firm life cycle, audit quality), etc., on the other hand, none of the effects of comparability of financial statements on idiosyncratic return volatility and in terms of According to the emphasis of the International Accounting Standards Transition Institutions and the Auditing Organization as the custodian of accounting standardization in Iran, on the great importance of comparability and the important role of comparability in empowering investors, creditors and other creditors in informed decision-making in this study. The relationship between comparability and idiosyncratic return volatility with respect to the effect of financial reporting quality on this relationship was investigated and this issue is one of the leading research innovations. Another theory of this research is that in this research, Rowling regression has been used to measure the idiosyncratic return volatility, which has not been used in other studies. The goal of the present study is to determine the effect of the financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. Method and Data:In order to test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 2010 to 2018. To test the research hypotheses, a multivariate regression model and combined data have been used. Findings:The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce. Conclusion and discussion: Idiosyncratic return volatility has increased over time, volatility in stock market returns has remained unchanged. As a result, the study of idiosyncratic return volatility is motivating since the upward trend in idiosyncratic return volatility has important implications for portfolio diversification, event studies, pricing options, and macroeconomics. Many investors may fail to diversify their portfolios in the way that financial theory recommends, and as a result, are affected by changes in idiosyncratic return volatility, so it is important to identify the factors that affect idiosyncratic return volatility. The result of testing the first hypothesis showed that the ability to compare financial statements hurts idiosyncratic return volatility. This means that the comparability of financial statements allows investors to more accurately assess and understand the firm's performance and cash flow by comparing similar companies and increases the quantity and quality of information needed by investors, it causes risk. Related to information and valuation is reduced and as a result, idiosyncratic return volatility is reduced. The results of testing the second hypothesis showed that when the quality of financial reporting is poor, the role of comparability of financial statements on reducing idiosyncratic return volatility becomes stronger. In the sense that when the quality of financial reporting is poor, it improves the comparability of the information environment and transparency about the firm and reduces investors' uncertainty about cash flow and stock returns, thus reducing idiosyncratic return volatility.
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