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The importance of brokerage house size in determining the utility of IFRS8 segment data to financial analysts

Ibrahim Al-Aamri, Simon Hussain, Chen Su and Hwa-Hsien Hsu

Journal of International Accounting, Auditing and Taxation, 2022, vol. 47, issue C

Abstract: This paper reveals the important role played by brokerage house size in determining the utility of segment data to financial analysts. Brokerage house size is a proxy both for analysts’ access to company managers and for their access to in-house expertise. Using data for large UK firms, we reveal that the shift to International Financial Reporting Standard 8 (IFRS8) led to significant improvements in forecast accuracy for analysts in large brokerage houses but not for those in small brokerage houses. In addition, the forecasting ability of analysts in smaller brokerage houses was impaired when segments represented lines-of-business. No such effect was evident in the case of large brokers’ analysts. We link these findings to the improved insight which analysts in large brokerages obtained from their superior access to managers and in-house support.

Keywords: Financial analysts; Earnings forecasts; Segment reporting; Brokerage size; UK; IFRS8 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:47:y:2022:i:c:s1061951822000271

DOI: 10.1016/j.intaccaudtax.2022.100472

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