The Effect of Mandatory IFRS Adoption on Financial Analysts' Information Environment

Donal Byard, Yinghua Li, Yong Yu

Research output: Contribution to journalArticle

200 Citations (Scopus)

Abstract

This paper examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) by the European Union on financial analysts' information environment. To control for the effect of confounding concurrent events, we use a control sample of firms that had already voluntarily adopted IFRS at least two years prior to the mandatory adoption date. We find that analysts' absolute forecast errors and forecast dispersion decrease relative to this control sample only for those mandatory IFRS adopters domiciled in countries with both strong enforcement regimes and domestic accounting standards that differ significantly from IFRS. Furthermore, for mandatory adopters domiciled in countries with both weak enforcement regimes and domestic accounting standards that differ significantly from IFRS, we find that forecast errors and dispersion decrease more for firms with stronger incentives for transparent financial reporting. These results highlight the important roles of enforcement regimes and firm-level reporting incentives in determining the impact of mandatory IFRS adoption.

Original languageEnglish (US)
Pages (from-to)69-96
Number of pages28
JournalJournal of Accounting Research
Volume49
Issue number1
DOIs
StatePublished - Mar 2011
Externally publishedYes

Fingerprint

Information environment
International Financial Reporting Standards
Financial analysts
Enforcement
Forecast dispersion
Forecast error
Incentives
Accounting standards
European Union
Analysts
Confounding
Financial reporting

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

The Effect of Mandatory IFRS Adoption on Financial Analysts' Information Environment. / Byard, Donal; Li, Yinghua; Yu, Yong.

In: Journal of Accounting Research, Vol. 49, No. 1, 03.2011, p. 69-96.

Research output: Contribution to journalArticle

@article{9aad38e2be5340bbabbcdccd42d5e53e,
title = "The Effect of Mandatory IFRS Adoption on Financial Analysts' Information Environment",
abstract = "This paper examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) by the European Union on financial analysts' information environment. To control for the effect of confounding concurrent events, we use a control sample of firms that had already voluntarily adopted IFRS at least two years prior to the mandatory adoption date. We find that analysts' absolute forecast errors and forecast dispersion decrease relative to this control sample only for those mandatory IFRS adopters domiciled in countries with both strong enforcement regimes and domestic accounting standards that differ significantly from IFRS. Furthermore, for mandatory adopters domiciled in countries with both weak enforcement regimes and domestic accounting standards that differ significantly from IFRS, we find that forecast errors and dispersion decrease more for firms with stronger incentives for transparent financial reporting. These results highlight the important roles of enforcement regimes and firm-level reporting incentives in determining the impact of mandatory IFRS adoption.",
author = "Donal Byard and Yinghua Li and Yong Yu",
year = "2011",
month = "3",
doi = "10.1111/j.1475-679X.2010.00390.x",
language = "English (US)",
volume = "49",
pages = "69--96",
journal = "Journal of Accounting Research",
issn = "0021-8456",
publisher = "Wiley-Blackwell",
number = "1",

}

TY - JOUR

T1 - The Effect of Mandatory IFRS Adoption on Financial Analysts' Information Environment

AU - Byard, Donal

AU - Li, Yinghua

AU - Yu, Yong

PY - 2011/3

Y1 - 2011/3

N2 - This paper examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) by the European Union on financial analysts' information environment. To control for the effect of confounding concurrent events, we use a control sample of firms that had already voluntarily adopted IFRS at least two years prior to the mandatory adoption date. We find that analysts' absolute forecast errors and forecast dispersion decrease relative to this control sample only for those mandatory IFRS adopters domiciled in countries with both strong enforcement regimes and domestic accounting standards that differ significantly from IFRS. Furthermore, for mandatory adopters domiciled in countries with both weak enforcement regimes and domestic accounting standards that differ significantly from IFRS, we find that forecast errors and dispersion decrease more for firms with stronger incentives for transparent financial reporting. These results highlight the important roles of enforcement regimes and firm-level reporting incentives in determining the impact of mandatory IFRS adoption.

AB - This paper examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) by the European Union on financial analysts' information environment. To control for the effect of confounding concurrent events, we use a control sample of firms that had already voluntarily adopted IFRS at least two years prior to the mandatory adoption date. We find that analysts' absolute forecast errors and forecast dispersion decrease relative to this control sample only for those mandatory IFRS adopters domiciled in countries with both strong enforcement regimes and domestic accounting standards that differ significantly from IFRS. Furthermore, for mandatory adopters domiciled in countries with both weak enforcement regimes and domestic accounting standards that differ significantly from IFRS, we find that forecast errors and dispersion decrease more for firms with stronger incentives for transparent financial reporting. These results highlight the important roles of enforcement regimes and firm-level reporting incentives in determining the impact of mandatory IFRS adoption.

UR - http://www.scopus.com/inward/record.url?scp=78751476634&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=78751476634&partnerID=8YFLogxK

U2 - 10.1111/j.1475-679X.2010.00390.x

DO - 10.1111/j.1475-679X.2010.00390.x

M3 - Article

VL - 49

SP - 69

EP - 96

JO - Journal of Accounting Research

JF - Journal of Accounting Research

SN - 0021-8456

IS - 1

ER -