Research | Wang Yakun: Do Larger Reporting Networks Yield Benefits from Information Network Effects?

Release time：28 September 2025

Comparative analysis (i.e., comparison of companies within the same industry by users of financial statements) is a key method for information analysis in capital markets. Consistent accounting standards, by improving reporting comparability, can potentially generate positive externalities for information users through “information network effects”—information users can compare and analyze information across more companies, thereby improving overall information quality. The study takes the global implementation of International Financial Reporting Standards (IFRS) in 2005 as an exogenous event to examine how it has improved the analysts’ information environment for U.S. companies through information network effects in an attempt to provide empirical evidence of such information network effects.

For example, during its early days (2012-2014), Tesla could not be directly compared with traditional automakers such as General Motors or Ford due to its distinct business model, technological focus, and growth trajectory. It was also difficult to compare it with most electric vehicle startups due to its significantly leading position in mass production scale and vertically integrated battery technology.

Many analysts encounter difficulties in benchmarking by average metrics in the industry (such as gross profit margin and R&D investment intensity) because Tesla’s combination of auto manufacturing, technological innovation, and direct sales model does not fit into existing industrial groupings. Given the lack of true comparable companies, simply applying valuation metrics such as the price-to-earnings ratio or enterprise value (EV)/EBITDA of comparable companies can easily lead to valuation bias and even significant errors in analysts’ financial analysis.

The consistency of accounting standards brought about by IFRS has made it easier for U.S. analysts to obtain financial information from non-U.S. companies in the same industry (such as BYD, NIO, and Li Auto in China), thereby helping them better analyze the financial reports of “unicorn” companies like Tesla.

Do Larger Reporting Networks Yield Benefits from Information Network Effects?, co-authored by Professor Wang Yakun (Eric) from the School of Management and Economics (SME), The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen), Professor Anna Bergman Brown from Clarkson University, Professor Donal Byard and Professor Masako Darrough, both from Baruch College, City University of New York (Baruch College—CUNY), and Professor Jangwon Suh from Queens College—CUNY, explores how information network effects improve the analysts’ information environment for U.S. companies by examining the exogenous impact of the global implementation of IFRS in 2005 on U.S. companies.