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

Georgios Georgakopoulos, Dimitrios Gounopoulos, Chen Huang, Victoria Patsika

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Article number100490
JournalJournal of International Accounting, Auditing and Taxation
Volume48
Early online date25 Jul 2022
DOIs
Publication statusPublished - 30 Sep 2022

Keywords

  • Corporate disclosure
  • IFRS
  • Information environment
  • IPOs
  • Management earnings forecast accuracy

ASJC Scopus subject areas

  • Accounting
  • Finance

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