Does Mandatory IFRS Adoption Improve the Information Environment?

57 Pages Posted: 6 Sep 2008 Last revised: 19 Jul 2013

See all articles by Joanne Horton

Joanne Horton

University of Warwick - Warwick Business School

George Serafeim

Harvard Business School

Ioanna Serafeim

Capital Market Commission

Date Written: 2013


More than 120 countries require or permit the use of International Financial Reporting Standards (‘IFRS’) by publicly listed companies on the basis of higher information quality and accounting comparability from IFRS application. However, the empirical evidence about these presumed benefits are often conflicting and fail to separate between information quality and comparability. In this paper we examine the effect of mandatory IFRS adoption on firms’ information environment. We find that after mandatory IFRS adoption consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. We also find decreasing forecast errors for voluntary adopters, but this effect is smaller and not robust. Moreover, we show that the magnitude of the forecast errors decrease is associated with the firm-specific differences between local GAAP and IFRS. This finding suggests that it is IFRS adoption rather than a correlated unobservable factor that is causing forecast errors to decrease. Exploiting individual analyst level data and isolating settings where analysts would benefit more from either increased comparability or higher quality information, we document that the improvement in the information environment is driven both by information and comparability effects. These results suggest that mandatory IFRS adoption has improved the quality of information intermediation in capital markets and as a result firms’ information environment by increasing both information quality and accounting comparability.

Keywords: IFRS, analysts, information environment, comparability, information quality

JEL Classification: M41, M44, M47, G14, G15, G29

Suggested Citation

Horton, Joanne and Serafeim, George and Serafeim, Ioanna, Does Mandatory IFRS Adoption Improve the Information Environment? (2013). Contemporary Accounting Research, Vol. 30, No. 1: 388-423., Available at SSRN: or

Joanne Horton

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States


Ioanna Serafeim

Capital Market Commission ( email )


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