Article | Contemporary Accounting Research | Spring 2013

Does Mandatory IFRS Adoption Improve the Information Environment?

by Joanne Horton, George Serafeim and Ioanna Serafeim


We examine the effect of mandatory International Financial Reporting Standards (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. 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 are robust to variations in the measurement of information environment quality, forecast horizon, sample composition, and tests of earnings management.

Keywords: International Accounting; Financial Reporting; Standards; Information; Quality; Earnings Management;


Horton, Joanne, George Serafeim, and Ioanna Serafeim. "Does Mandatory IFRS Adoption Improve the Information Environment?" Contemporary Accounting Research 30, no. 1 (Spring 2013): 388–423.