Are Analyst Stock Recommendation Revisions More Informative in the Post-IFRS Period?

Journal of Business Finance & Accounting, Forthcoming

50 Pages Posted: 2 Nov 2017

See all articles by Andreas Charitou

Andreas Charitou

University of Cyprus

Irene Karamanou

University of Cyprus - Department of Public and Business Administration

Anastasia Kopita

University of Warwick - Warwick Business School; University of Essex

Multiple version iconThere are 2 versions of this paper

Date Written: July 31, 2017

Abstract

This paper investigates whether the mandatory IFRS adoption has affected the informativeness of analyst recommendation revisions in Europe. Although prior studies document that IFRS adoption improved analyst forecast attributes, the impact of IFRS can’t be completely assessed without examining how the market reacts to information-rich events in an environment with enhanced disclosure. To examine this question we utilize a difference-in-differences design using as main control sample firms that had voluntarily adopted IFRS before the EU’s mandated switch. Overall, our evidence suggests that after the mandatory adoption of IFRS both analyst upgrades and downgrades are more informative. These results hold after controlling for a number of variables that capture analyst, firm and information environment characteristics and are robust to a number of sensitivity analyses including the use of a US control sample. Finally, we examine whether our results are sensitive to the level of accounting enforcement. We find that analyst downgrades are more informative in the post-IFRS period for firms in both high and low enforcement environments. Analyst upgrades, however, are more informative only if they are issued for firms in high enforcement countries.

Keywords: IFRS, recommendations, enforcement, financial analysts, informativeness

Suggested Citation

Charitou, Andreas and Karamanou, Irene and Kopita, Anastasia, Are Analyst Stock Recommendation Revisions More Informative in the Post-IFRS Period? (July 31, 2017). Journal of Business Finance & Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3062533

Andreas Charitou

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 2 893624 (Phone)
+357 2 895030 (Fax)

Irene Karamanou

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS
+357 2 892471 (Phone)
+357 2 892460 (Fax)

Anastasia Kopita (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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