Analyst Following and Forecast Accuracy After Mandated IFRS Adoptions
Journal of Accounting Research, Forthcoming
61 Pages Posted: 21 Jun 2011
Date Written: June, 15 2011
Abstract
This study investigates how accounting harmonization affects one particular group of financial statement users - financial analysts. We find that mandatory IFRS adoption attracts foreign analysts, particularly those from countries that are simultaneously adopting IFRS along with the covered firm’s country and those with prior IFRS experience. We also find that mandatory IFRS adoption improves foreign analysts’ forecast accuracy. The change in analyst following increases with the distance between prior local GAAP and IFRS and with the extent to which IFRS adoption eliminates GAAP differences between the firm’s country and the analyst’s country. IFRS adoption also attracts more local analysts, particularly those with prior IFRS experience and with an international portfolio prior to mandated IFRS adoption in their home country. Local analysts’ forecast accuracy is not affected by IFRS adoption. Overall, our results suggest that accounting harmonization brings comparability benefits that enhance the usefulness of accounting data.
Keywords: IFRS, accounting harmonization, analyst following, analysts' forecasts
JEL Classification: G14, G15, M441
Suggested Citation: Suggested Citation
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