How do sell-side equity research analysts evaluate items affecting comparability?

Sammanfattning: We investigate sell-side equity research analysts' behaviour in the process of choosing whether to exclude or include items affecting comparability (IAC) in their valuation. We used a qualitative method by interviewing 16 analysts in order to understand how they adjust for IAC and potential factors influencing their approach. In line with previous research, our results show that analysts find IAC to be an ambiguous area involving a subjective decision process in order to reach higher earnings quality. We find that only a quarter of our sample selection makes own adjustments to IAC, where the most influential factor is how frequently the IAC occur. Furthermore, our study confirms previous findings suggesting that adjustments are mainly done on a case-by-case basis where the analyst evaluates each company separately.