Mandatory IFRS adoption and analyst forecast accuracy: the role of financial statement-based forecasts and analyst characteristics

Matthias Demmer, Paul Pronobis () and Teri Lombardi Yohn ()
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Matthias Demmer: Freie Universität Berlin
Paul Pronobis: ESCP Europe
Teri Lombardi Yohn: Indiana University

Review of Accounting Studies, 2019, vol. 24, issue 3, No 8, 1022-1065

Abstract: Abstract This study examines whether the improvement in analyst forecast accuracy around mandatory IFRS adoption is associated with the improvement in the accuracy of financial statement-based forecasts. We find significant out-of-sample improvement in financial statement-based forecast accuracy around mandatory IFRS adoption and significant improvement in analyst forecast accuracy only in countries that made concurrent improvements to financial reporting enforcement. We show that the improvement in analyst forecast accuracy is associated with the improvement in financial statement-based forecast accuracy around IFRS adoption. We also show that analyst forecasts, particularly for firms whose analysts forecast under favorable conditions (i.e., analysts who are less busy with more experience and resources), have a greater association with financial statement-based forecasts, after mandatory IFRS adoption in countries with concurrent changes in enforcement.

Keywords: Financial statement analysis; Mandatory IFRS adoption; Analyst forecasts; Profitability forecasts (search for similar items in EconPapers)
JEL-codes: G17 M41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s11142-019-9481-7

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