Analyst Following and Forecast Accuracy After Mandated IFRS Adoptions

Journal of Accounting Research, Forthcoming

61 Pages Posted: 21 Jun 2011

See all articles by Hongping Tan

Hongping Tan

McGill University

Shiheng Wang

Hong Kong University of Science & Technology (HKUST)

Michael Welker

Queen's University - Smith School of Business

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

Tan, Hongping and Wang, Shiheng and Welker, Michael, Analyst Following and Forecast Accuracy After Mandated IFRS Adoptions (June, 15 2011). Journal of Accounting Research, Forthcoming , Available at SSRN: https://ssrn.com/abstract=1865369

Hongping Tan

McGill University ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Shiheng Wang

Hong Kong University of Science & Technology (HKUST) ( email )

Clear Water Bay
Kowloon, 999999
Hong Kong
(852) 2358 7570 (Phone)
(852) 2358 1693 (Fax)

Michael Welker (Contact Author)

Queen's University - Smith School of Business ( email )

Kingston
Ontario, Ontario K7L 3N6
Canada

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