Do Accounting Standards Matter to Financial Analysts? An Empirical Analysis of the Effect of Cross-listing from Different Accounting Standards Regimes on Analyst Following and Forecast Error

The paper explores whether the effects of cross-listing on analyst following and forecast error differ between firms with different accounting standards. The results reveal a higher increase in the number of analysts for cross-listed firms that follow their home country GAAPs prior cross-listing, and partially reconcile or fully switch to IAS/US GAAP/ or UK GAAP after cross-listing, compared to those which already adopt IAS or US GAAP prior to cross-listing. After controlling for raising capital, we find that firms that fully switch to IAS/US GAAP have a higher increase in analyst following after cross-listing compared to firms that partially reconcile to IAS/US GAAP. In addition, we find a higher increase in analyst following after cross-listing for firms from low-level accounting standards environments compared to firms from high-level accounting standards environments. Our results show evidence of an increase in the magnitude of analysts' forecast errors after cross-listing for firms that follow home GAAP pre cross-listing but partially reconcile to IAS/US GAAP or UK GAAP. On the other hand, we report a decrease in the forecast error for firms that fully switch to IAS/US GAAP