Download this Paper Open PDF in Browser

The Effect of Mandatory IFRS Adoption on Financial Analysts’ Information Environment

Journal of Accounting Research, Forthcoming

38 Pages Posted: 16 Oct 2010 Last revised: 23 Nov 2010

Donal Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy

Ying Li Compton

Securities and Exchange Commission; George Washington University - School of Business

Yong Yu

University of Texas at Austin

Date Written: October 16, 2010

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. Further, 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.

Keywords: IFRS, Mandatory Adoption, Financial Analysts, Information Environment, Enforcement, Reporting Incentives

JEL Classification: G14, M41

Suggested Citation

Byard, Donal and Compton, Ying Li and Yu, Yong, The Effect of Mandatory IFRS Adoption on Financial Analysts’ Information Environment (October 16, 2010). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1693003

Donal A. Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3187 (Phone)
646-312-3161 (Fax)

Ying Li Compton

Securities and Exchange Commission ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

George Washington University - School of Business ( email )

2201 G Street NW
Funger 610
Washington, DC 20052
United States
(202)994-1268 (Phone)

Yong Yu (Contact Author)

University of Texas at Austin ( email )

1 University Station B6400
Austin, TX 78712
United States
(512)471-6714 (Phone)
(512)471-3904 (Fax)

Paper statistics

Downloads
1,090
Rank
15,452
Abstract Views
4,390