Market Response to Analyst Recommendation-Effect of IFRS Enforcement Intensity

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Abstract

This study explores the analyst-investor relationship with the background of IFRS enforcement intensity using a sample of firms in countries mandatorily adopted IFRS. It posits and finds that in the long run, the stock market responds to analyst recommendation negatively. Accounting standards enforcement intensity mitigates market’s over reliance on analyst recommendation information. However, this effect is not obvious for short term market’s reaction to analyst recommendation revision. It implies that over the long term, rigorous IFRS enforcement establishes a more mature and efficient accounting information environment. Therefore investors rely less on analyst recommendation information in making their investment decisions.

Author

• Jing Wang, Kent State University