Mandatory IFRS adoption and its impact on analysts' forecasts

Jiao, Tao; Koning, Miriam; Mertens, Gerard; Roosenboom, Peter

doi:10.1016/j.irfa.2011.05.006

Cited by 74 publications

(80 citation statements)

References 23 publications

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“…Recent studies in other countries show that the adoption of international standards has reached the aim of improvement in information quality, as demonstrated by Barth, Landsman and Lang (2008) and Jiao, Koning, Mertens and Roosenboom (2011). Within the research line of accounting information quality improvement, studies assess the impact of the adoption of international standards on equity cost of companies, because, according to the paper of Lee, Walker and Christensen (2010), the international standards would be related to the increase of informational content disclosed by companies and the prevalence of essence over form tends to reduce the information asymmetry and the consequent reduction of shareholder risk.…”

Section: • Impact Of Adopting Ifrs Standard On the Equity Cost Of Bramentioning

confidence: 96%

Impact of Adopting Ifrs Standard on the Equity Cost of Brazilian Open Capital Companies

Gatsios

Silva

Ambrozini

et al. 2016

RAM, Rev. Adm. Mackenzie

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Este artigo pode ser copiado, distribuído, exibido, transmitido ou adaptado desde que citados, de forma clara e explícita, o nome da revista, a edição, o ano e as páginas nas quais o artigo foi publicado originalmente, mas sem sugerir que a RAM endosse a reutilização do artigo. Esse termo de licenciamento deve ser explicitado para os casos de reutilização ou distribuição para terceiros. Não é permitido o uso para fins comerciais. • Reporting Standards aims to increase the quality of accounting information. Studies performed in Europe suggest that, after the adoption of the IFRS standard, there was a reduction in the equity cost of companies due to the reduction of information asymmetry and risk. Key methodological aspects: The equity cost was calculated using the capital asset pricing model (CAPM) adapted to the Brazilian case. The empirical strategy was the difference analysis in differences, comparing the results of companies that voluntarily adopted the IFRS with companies that adopted IFRS after the mandatory adoption period. Summary of key results:The results indicate that the adoption of the IFRS standard does not contribute to reduce the equity cost in Brazil. Key considerations/conclusions: Suggesting that the process of adopting the international accounting standard may take more time to impact the equity cost of Brazilian open capital companies, since the impact of IFRS is not related only with the adoption, but also with its use by companies and users. KEYWORDSCost of equity. CAPM. IFRS. Quality of accounting information. Brazil.

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Section: • Impact Of Adopting Ifrs Standard On the Equity Cost Of Bramentioning

confidence: 96%

Impact of Adopting Ifrs Standard on the Equity Cost of Brazilian Open Capital Companies

Gatsios

Silva

Ambrozini

et al. 2016

RAM, Rev. Adm. Mackenzie

View full text Add to dashboard Cite

show abstract

“…The impact of the IFRS mandatory adoption on analysts' forecasts has been also studied by (Jiao et al, 2012) in the European context. The results show that the forecasts become more accurate and less dispersed after the adoption of the new accounting standards.…”

Section: Ifrs and Analysts' Forecast Propertiesmentioning

confidence: 99%

“…The size of the company for example has been introduced by several researchers to explain the cost of capital (Botosan, 1997;Gebhardt et al, 2001;Easton, 2004;Francis et al, 2008;and Khotari et al, 2009). This variable is negatively related to the cost of capital and to the error and dispersion of financial analysts' forecasts (Lang & Lundholm, 1993;Jiao et al, 2012). However, large firms are considered more transparent.…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

“…Consequently, large companies are expected to have a high level of disclosure which leads to less cost of capital, greater precision and less dispersion in financial analysts' forecasts. Similarly to prior studies (Ashbaugh & Pincus 2001;Jiao et al, 2012), the firm size is defined as the natural log of a firm's market capitalization at the end of year t-1.…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

“…The number of analysts is another variable that may have an impact on the forecasts quality (Lang & Lundholm, 1996;Lys & Soo, 1995;Byard et al, 2011;and Jiao et al, 2012). It is determined by the number of analysts following the company and providing earnings forecast (Lang & Lundholm, 1996).…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

See 2 more Smart Citations

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

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The purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. AbstractThe purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. JEL Classification: M40, G34

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The impact of IFRS complexity on analyst forecast properties: The moderating role of high quality audit

et al. 2021

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This paper examines the impact of International Financial Reporting Standards (hereafter IFRS) complexity on analyst forecast properties including forecast errors, forecast dispersion and forecast revision. Because high-quality audit is likely to moderate the effect of complexity on analyst forecast properties, Industry Specialization (ISP) as a proxy for high quality audit is introduced as a moderating variable in this paper. The complexity of individual IFRS standards is measured based on IFRS reconciliation statements capturing the adjustments on accounts affected by the changes in accounting standards.We analyze 322 companies listed on the Australian Securities Exchange (ASX). Our results suggest that all IFRS standards are not equally complex. A few standards are relatively more complex. These standards have a positive effect on analyst forecast errors, forecast dispersion and forecast revision. In addition, we find that high quality audit (proxied by city-level industry specialist auditors) can mitigate the adverse impact of IFRS complexity on analyst forecast errors but not on forecast dispersion and revision. More interestingly, the mitigating effect of high quality audit is restricted to only a group of companies exposed to a higher level of aggregate IFRS complexity. The findings of our study contribute to the IFRS literature by identifying the most complex accounting standards. Secondly, this study provides an ex-ante experiment in IFRS adoption, which can be used by adopting countries to understand the impact of IFRS on the analyst forecasts. Finally, our study helps regulators to understand the effects of the complexity of accounting standards on users of financial statements.

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Mandatory IFRS adoption and its impact on analysts' forecasts

Cited by 74 publications

References 23 publications

Impact of Adopting Ifrs Standard on the Equity Cost of Brazilian Open Capital Companies

Impact of Adopting Ifrs Standard on the Equity Cost of Brazilian Open Capital Companies

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

The impact of IFRS complexity on analyst forecast properties: The moderating role of high quality audit

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