Voluntary IFRS adoption, analyst coverage, and information quality : International evidence

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)22_Publication in policy or professional journal

42 Scopus Citations
View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)45-76
Journal / PublicationJournal of International Accounting Research
Volume11
Issue number1
Publication statusPublished - 2012

Abstract

This study investigates whether and how a firm's voluntary adoption of International Financial Reporting Standards (IFRS) affects financial analysts' decisions to follow the firm, and improves the information environment, as reflected in the precision of the analysts' information set. First, this study finds that firms with voluntary IFRS adoptions attract more analysts than non-adopter firms. Second, it finds that the added disclosure via IFRS adoption contributes to the better precision of the analyst information set. Third, this study finds that the improved precision of total analyst information is attributed to not only an increase in the precision of public information common to all analysts, but also an increase in the precision of private information that is idiosyncratic to a particular analyst. This finding suggests a complementary relation with respect to the effect of IFRS adoption on the quality of public and private information. Finally, further analysis reveals that analyst coverage also improves the precision of information. Specifically, this study provides evidence suggesting that voluntary IFRS adoption is associated with more precise public (common) information, while analyst coverage is associated with more precise private (idiosyncratic) information.

Research Area(s)

  • Analyst coverage, Common information, Idiosyncratic information, Information quality, International financial reporting standards