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Do accounting standards matter to financial analysts? An empirical analysis of the effect of cross-listing from different accounting standards regimes on analyst following and forecast error

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  • Abdallah, Abed AL-Nasser
  • Abdallah, Wissam
  • Ismail, Ahmad

Abstract

This paper explores whether the effects of cross-listing on analyst following and forecast error differ among firms with different accounting standards. The results reveal a higher increase in the number of analysts for cross-listed firms that follow their home country's GAAP prior to cross-listing and reconcile or switch to IAS/US GAAP or UK GAAP after cross-listing, compared to those that adopt IAS or US GAAP prior to cross-listing. We find that firms that switch to IAS/US GAAP have a higher increase in analyst following after cross-listing compared to firms that reconcile to IAS/US GAAP. In addition, we find a higher increase in analyst following after cross-listing for firms from low-level accounting standards environments compared to firms from high-level accounting standards environments. Our results show evidence of an increase in the magnitude of analysts’ forecast error after cross-listing for firms that follow their home country's GAAP pre-cross-listing but reconcile post-cross-listing to IAS/US GAAP or UK GAAP. On the other hand, we report a decrease in forecast error for firms that switch to IAS/US GAAP.

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Bibliographic Info

Article provided by Elsevier in its journal The International Journal of Accounting.

Volume (Year): 47 (2012)
Issue (Month): 2 ()
Pages: 168-197

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Handle: RePEc:eee:accoun:v:47:y:2012:i:2:p:168-197

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Web page: http://www.elsevier.com/locate/inca/620179

Related research

Keywords: Cross-listing; Information disclosure; Accounting standards; Analyst following; Forecast error;

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