Analysts’ Information Environment and Voluntary Turn Away from IFRS

We investigate the relation between firms’ financial disclosures and analysts' information environment in a country-specific setting to deepen our understanding of financial analysts’ role as intermediaries for well-functioning capital markets. We leverage the Swiss regulatory context, which enables publicly traded firms to voluntarily switch to a less complex and costly to implement accounting standard to provide more direct insights into how changes in firms’ disclosures affect analyst following, forecast accuracy, and recommendation informativeness. Using difference-in-differences analysis, we find that firms voluntarily turning away from IFRS to Swiss GAAP experience a decrease in analysts’ following, a decrease in forecasts’ accuracy, and their upgrade recommendations are less informative. Additional analysis reveal that these effects are mainly driven by analysts without prior experience with Swiss GAAP and not by foreign analysts. Our results highlight the role of financial analysts’ accounting expertise in shaping firms’ information environment.