The impact of IFRS adoption on IPO management earnings forecasts in Australia

Georgakopoulos, Georgios, Gounopoulos, Dimitrios, Huang, Chen and Patsika, Victoria ORCID: https://orcid.org/0000-0002-5763-2020 2022. The impact of IFRS adoption on IPO management earnings forecasts in Australia. Journal of International Accounting, Auditing and Taxation 48 , 100490. 10.1016/j.intaccaudtax.2022.100490

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Abstract

This study investigates the accuracy of management earnings forecasts under International Financial Reporting Standards (IFRS) in the context of an initial public offering (IPO). We observe a decline in management forecast errors (FEs) in Australia following the mandatory implementation of IFRS in 2005. Further evidence suggests that IPO management earnings forecasts become more conservative after IFRS was required. We argue that IFRS enables investors to better evaluate IPO firms’ performance and demand higher returns from firms that report inflated and inaccurate earnings forecasts. We also show that over-optimistic earnings forecasts and larger forecasting errors result in greater underpricing under the IFRS regime. Overall, this study suggests that IFRS, as a set of high-quality accounting standards, improves corporate disclosure quality and the information environment.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	1061-9518
Date of First Compliant Deposit:	1 August 2022
Date of Acceptance:	14 July 2022
Last Modified:	09 Nov 2024 05:00
URI:	https://orca.cardiff.ac.uk/id/eprint/151494

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