More than 12 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.
Related Content
Earnings management and the role of auditors in an unusual IFRS context: The case of Greece
The mandatory adoption of International Financial Reporting Standards (IFRS) on January 1, 25 aimed to improve the quality of financial reporting in Greece, which had been regularly criticized for the practice of earnings management and the ineffectiveness of external auditing. However, the unusu...


Dividend Payouts and Information Shocks
We examine changes in firms’ dividend payouts following an exogenous shock to the information asymmetry problem between managers and investors. Agency theories predict a decrease in dividend payments to the extent that improved public information lowers managers’ need to convey their commitme...
The value relevance of voluntary European embedded value disclosures: evidence from UK life insurance companies
This study examines the value relevance of the voluntary embedded value (EV) disclosures by publicly listed British life insurers pre and post the mandatory adoption of International Financial Reporting Standards (IFRS) in 2005. It provides evidence for the first time that the voluntary European ...


Market Assessment of Intangibles and Voluntary Disclosure about Innovation: The Incidence of IFRS
This study investigates the incidence of IFRS on stock market assessment of intangibles and voluntary disclosure about innovation. Three regression models are developed. The first model investigates the stock market valuation of intangible assets and disclosure about innovation. In the second mod...
Does Mandatory Adoption of IFRS Guarantee Compliance?
In this study, we examine whether the mandatory adoption of IFRS by Turkish listed companies in 2005 was successful in practice and what role firm and country level factors played in the adoption. We determine the firm-specific factors that affect the degree of change in both measurement and disc...

Russian Accounting System: Value Relevance of Reported Information and the IFRS Adoption Perspective
In this paper I perform an empirical investigation into the value relevance of information reported by Russian public firms from two distinct perspectives. First, I document that prior to 2011, investors relied on information incorporated in the book value of equity. The value relevance of report...
Mandatory IFRS adoption and executive compensation: Evidence from China
This study investigates how the mandatory adoption of International Financial Reporting Standards (IFRS) affects the contractual benefits of using accounting information to determine executive compensation in China. After controlling for firm and corporate governance characteristics, we find stro...

Mandatory IFRS Adoption and the Contractual Usefulness of Accounting Information in Executive Compensation
We examine how the mandatory adoption of IFRS in Continental Europe affects the contractual usefulness of accounting information in executive compensation, as reflected in pay-performance sensitivity (PPS) and relative performance evaluation (RPE). The empirical evidence indicates a weak increase...
Some aspects of the adoption of IFRS-4 (insurance contract) by insurance companies in Bahrain: an exploratory study
Using a questionnaire method on a small sample size of insurance companies that claim to have been applying IFRS-4 in Bahrain, this study examines to what extent these companies have been applying the provisions of the standard. The study covers the views of the insurance companies on the relevan...

Influence of a mandatory IFRS Adoption on Accounting Practice: Evidence from Australia, Hong Kong and the United Kingdom
This study evaluates the changes of accounting policy choices and the harmonisation of accounting practices for two important financial reporting items within and between three IFRS adopting counties. Furthermore, methodological shortcomings in the prior harmonisation literature are addressed thr...