Does Mandatory IFRS Adoption Improve the Information Environment?

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Does Mandatory IFRS Adoption Improve the Information Environment?

Show simple item record Horton, Joanne Serafeim, Georgios Serafeim, Ioanna 2012-11-09T15:32:04Z 2012-11-09
dc.identifier.citation Horton, Joanne, George Serafeim, and Ioanna Serafeim. "Does Mandatory IFRS Adoption Improve the Information Environment?" Contemporary Accounting Research (forthcoming). en_US
dc.identifier.issn 0823-9150 en_US
dc.description.abstract 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. en_US
dc.language.iso en_US en_US
dc.relation.hasversion en_US
dash.license OAP
dc.subject international accounting en_US
dc.subject financial reporting en_US
dc.subject standards en_US
dc.subject information en_US
dc.subject quality en_US
dc.subject earnings management en_US
dc.title Does Mandatory IFRS Adoption Improve the Information Environment? en_US
dc.type Journal Article en_US
dc.description.version Author's Original en_US
dc.relation.journal Contemporary Accounting Research en_US Serafeim, Georgios 2012-11-09T15:32:04Z

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