International Financial Reporting Standards adoption and information quality: Evidence from Brazil

Abstract

This paper examines whether the mandatory adoption of International Financial Reporting Standards (IFRS) in Brazil in 2010 has improved the value relevance of accounting information, information content of earnings, financial analyst forecasting activities, and liquidity. We examine the variables in the pre-IFRS mandatory adoption sample period, considered herein as 2008 to 2009, and the post-IFRS adoption period of 2011 to 2012. We provide evidence demonstrating improvement in value relevance of earnings and number of analysts following the firms in the period after IFRS adoption, but we do not find improvements in information content of earnings, accuracy in analyst forecasting, and liquidity in the post-adoption period. Our findings suggest a positive relationship between IFRS adoption and some areas of information quality in Brazil. By focusing on one important economy as it takes significant steps toward full convergence with IFRS, our study contributes to the growing literature concerning the impact of IFRS adoption around the world.