Do Compustat Financial Statement Data Articulate?

65 Pages Posted: 18 Jan 2014 Last revised: 15 Dec 2015

See all articles by Ryan Casey

Ryan Casey

University of Denver

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Michael Kirschenheiter

College of Business Administration University of Illinois at Chicago

Siyi Li

California State University, Fullerton - Department of Accounting

Shail Pandit

University of Illinois at Chicago

Date Written: September 17, 2015

Abstract

Using the Financial Statement Balancing Model (FSBM) from Compustat, we examine whether financial statement data articulate for 10,681 U.S. non-financial firms for 24 years, a total of 92,951 firm years. We accomplish three specific research goals. First, we build the first formal model of financial statement articulation, providing a benchmark for subsequent discussions of articulation. Second, we show how to handle missing data to ensure articulation, by either filling in zeros or backing out the missing data with other variables in the equations. Third, we produce modified variables that resolve exceptions in the articulating equations, so that these variables form relations that are consistent across time and firms. We then compare the “modified database” (MDB) using these updated variables with the original Compustat data, and find significant differences in many commonly used financial variables, such as the Altman’s z-score, and the disclosure quality based on non-missing Compustat variables. We believe that our MDB has the potential to increase sample size and the accuracy of data in empirical studies, which could help researchers draw improved inferences.

Keywords: financial statement articulation; data integrity; data errors; Compustat

Suggested Citation

Casey, Ryan J. and Gao, Feng and Kirschenheiter, Michael and Li, Siyi and Pandit, Shailendra, Do Compustat Financial Statement Data Articulate? (September 17, 2015). Available at SSRN: https://ssrn.com/abstract=2380698 or http://dx.doi.org/10.2139/ssrn.2380698

Ryan J. Casey

University of Denver ( email )

2101 South University
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Denver, CO 80208-8921
United States
(303) 871-7695 (Phone)

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

Michael Kirschenheiter (Contact Author)

College of Business Administration University of Illinois at Chicago ( email )

601 South Morgan Street
11th Floor
Chicago, IL 60607
United States
312.996-2284 (Phone)
312.996-4520 (Fax)

Siyi Li

California State University, Fullerton - Department of Accounting ( email )

P.O. Box 34080
Fullerton, CA 92834-6848
United States

Shailendra Pandit

University of Illinois at Chicago ( email )

601 South Morgan Street
University Hall, Room 2303
Chicago, IL 60607
United States
(312) 355-1331 (Phone)
(312) 996-4520 (Fax)

HOME PAGE: http://business.uic.edu/faculty/shailendra-shail-pandit

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