Mandatory Financial Reporting and Voluntary Disclosure: The Effect of Mandatory IFRS Adoption on Management Forecasts

Accounting Review - Tập 91 Số 3 - Trang 933-953 - 2016
Xi Li1, Holly Yang2
1Temple University
2Singapore Management University

Tóm tắt

ABSTRACT This study examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) on voluntary disclosure. Using a difference-in-differences analysis, we document a significant increase in the likelihood and frequency of management earnings forecasts following mandatory IFRS adoption, consistent with the notion that IFRS adoption alters firms' disclosure incentives in response to increased capital-market demand. We find the increase to be larger among firms domiciled in code-law countries, suggesting a catching-up effect among firms facing low disclosure incentives pre-adoption. We then propose and test three channels through which IFRS adoption could alter firms' disclosure incentives: improved earnings quality, increased shareholder demand, and increased analyst demand. We find evidence consistent with all three channels.

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