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 language | English (US) |
|---|---|
| Pages (from-to) | 69-96 |
| Number of pages | 28 |
| Journal | Journal of Accounting Research |
| Volume | 49 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 2011 |
| Externally published | Yes |
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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 journal › Article
}
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.
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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
AN - SCOPUS:78751476634
VL - 49
SP - 69
EP - 96
JO - Journal of Accounting Research
JF - Journal of Accounting Research
SN - 0021-8456
IS - 1
ER -