International GAAP Differences - The Impact on Foreign Analysts

60 Pages Posted: 5 Jan 2006  

Kee-Hong Bae

York University - Schulich School of Business

Hongping Tan

York University - Schulich School of Business

Michael Welker

Queen's University - Queen's School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 23, 2006

Abstract

This paper investigates the relation between differences in accounting standards across countries and foreign analyst following and forecast accuracy. We develop two measures of differences in generally accepted accounting principles (GAAP) for 1,176 country-pairs. We then examine the impact of these measures of accounting differences on foreign analysts. In so doing, we utilize a unique database that identifies the location of financial analysts around the world, creating a sample that covers 6,888 foreign analysts making a total of 43,968 forecasts for 6,169 firms from 49 countries during 1998 - 2004. We find that the extent to which GAAP differs between two countries is negatively related to both foreign analyst following and forecast accuracy. Our results suggest that GAAP differences are associated with economic costs for financial analysts.

Keywords: GAAP differences, foreign analyst following, forecast accuracy

JEL Classification: M41, M44, M47, G29

Suggested Citation

Bae, Kee-Hong and Tan, Hongping and Welker, Michael, International GAAP Differences - The Impact on Foreign Analysts (October 23, 2006). Available at SSRN: https://ssrn.com/abstract=873600 or http://dx.doi.org/10.2139/ssrn.873600

Kee-Hong Bae

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext) 20248 (Phone)
416-736-5687 (Fax)

Hongping Tan

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Michael Welker (Contact Author)

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

Kingston
Ontario, Ontario K7L 3N6
Canada

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