Abstract:
More than 120 countries require or permit the use of International Financial Reporting Standards (IFRS) by publicly listed companies. However, theempirical evidence about these presumed benefits are often conflicting and fail to separate between information quality and comparability. In this paper the study examines theeffect of mandatory IFRS adoption on firms information environment. The study finds that after mandatory IFRS adoption consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. Exploiting individual analyst level data and isolating settings where analysts would benefit more from eitherincreased comparability or higher quality information. The study documents that the improvement in the information environment is driven both by information and comparabilityeffects. These results suggest that mandatory IFRS adoption has improved the quality of information intermediation in capital markets and as a result firms informationenvironment by increasing both information quality and accounting comparability.