Abstract

http://ssrn.com/abstract=270619
 
 

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Domestic Accounting Standards, International Accounting Standards, and the Predictability of Earnings


Hollis Ashbaugh Skaife


Graduate School of Management, UC-Davis; University of Wisconsin, Madison - Department of Accounting and Information Systems

Morton Pincus


University of California, Irvine


Journal of Accounting Research, forthcoming

Abstract:     
We investigate (1) whether the variation in accounting standards across national boundaries relative to International Accounting Standards (IAS) has an impact on the ability of financial analysts to forecast non-US firms' earnings accurately, and (2) whether analyst forecast accuracy changes after firms adopt IAS. IAS are a set of financial reporting policies that typically require increased disclosure and restrict management's choices of measurement methods relative to the accounting standards of our sample firms' countries of domicile. We develop indexes of differences in countries' accounting disclosure and measurement policies relative to IAS, and document that greater differences in accounting standards relative to IAS are significantly and positively associated with the absolute value of analyst earnings forecast errors. Further, we show that analyst forecast accuracy improves after firms adopt IAS. More specifically, after controlling for changes in the market value of equity, changes in analyst following, and changes in the number of news reports, we find that the convergence in firms' accounting policies brought about by adopting IAS is positively associated with the reduction in analyst forecast errors.

Keywords: International Accounting Standards; IAS; Analyst earnings forecasts

JEL Classification: F3, M41, M44, M47

Accepted Paper Series





Not Available For Download

Date posted: August 31, 2001  

Suggested Citation

Skaife, Hollis Ashbaugh and Pincus, Morton, Domestic Accounting Standards, International Accounting Standards, and the Predictability of Earnings. Journal of Accounting Research, forthcoming. Available at SSRN: http://ssrn.com/abstract=270619

Contact Information

Hollis Ashbaugh Skaife
Graduate School of Management, UC-Davis ( email )
Graduate School of Management
1 Shields Ave
Davis, CA 95616
United States
University of Wisconsin, Madison - Department of Accounting and Information Systems ( email )
School of Business
975 University Avenue
Madison, WI 53706
United States
608-263-7979 (Phone)
608-263-0477 (Fax)
Morton P.K. Pincus (Contact Author)
University of California, Irvine ( email )
Irvine, CA 92697-3125
United States
949-824-4062 (Phone)
949-725-2812 (Fax)
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