Which Analysts Benefited Most from Mandatory IFRS Adoption in Europe?

Journal of International Accounting Research, Forthcoming

This paper is a significantly revised version of the paper titled "Mandatory Adoption of IFRS and Analysts’ Forecasts Information Properties", and which was known as CentER Discussion Paper Series No. 2010-112.

Posted: 9 Nov 2010 Last revised: 18 Aug 2017

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Philip Joos

Tilburg University

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus

Date Written: August 17, 2017

Abstract

This study examines whether financial analysts’ research structure and portfolio selection choices helped in improving relative earnings forecast accuracy around mandatory IFRS adoption in Europe. Using a sample of 68,665 one-year ahead forecasts for 1,980 publicly listed firms, we find that market-wide mandatory IFRS adoption in the European Union resulted in a significant improvement in the relative forecast accuracy of sector specialists compared to generalists, while country specialists retained a relative accuracy advantage independent of the period of study. Moreover, sector specialists outperformed generalists especially for firms with large local GAAP to IFRS income reconciliations in the first-time IFRS adoption year and when analysts’ research portfolios prior to IFRS adoption exhibited high variability in local GAAP reporting practices. Additional analysis indicates that IFRS enabled analysts to initiate coverage of more firms, especially smaller ones, in their sector of specialization. Overall, our results are consistent with the notion that mandatory IFRS adoption in Europe reduced information processing costs and enlarged the within-industry valuation scope.

Keywords: relative forecast accuracy; mandatory IFRS adoption; analyst specialization

JEL Classification: G15, M41

Suggested Citation

Beuselinck, Christof and Joos, Philip and Khurana, Inder and Van der Meulen, Sofie, Which Analysts Benefited Most from Mandatory IFRS Adoption in Europe? (August 17, 2017). Journal of International Accounting Research, Forthcoming, This paper is a significantly revised version of the paper titled "Mandatory Adoption of IFRS and Analysts’ Forecasts Information Properties", and which was known as CentER Discussion Paper Series No. 2010-112., Available at SSRN: https://ssrn.com/abstract=1705402 or http://dx.doi.org/10.2139/ssrn.1705402

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Philip Joos

Tilburg University ( email )

School of Economics and Management
Warandelaan 2
Tilburg, 5000 LE
Netherlands
31 13 4668716 (Phone)
31 13 4668001 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/philjoos/

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000
France

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