Mandatory Ifrs and Properties of Analysts' Forecasts: How Much Does Enforcement Matter? Mandatory Ifrs and Properties of Analysts' Forecasts: How Much Does Enforcement Matter?

250 words) We examine (1) whether analysts’ forecast accuracy and the extent to which they disagree have declined since the mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union (EU) in 2005, and (2) whether differences between countries in their enforcement of accounting standards are a contributing factor. Based on a sample of 40,123 firm-month observations from 13 European countries during 2002-2007, we find analysts’ forecast errors and dispersion are indeed significantly smaller in the post-IFRS period, implying an increase in overall quality of financial reporting following widespread mandatory adoption of IFRS. We show enforcement proxies that focus on accounting enforcement (we use a selfconstructed proxy that distinguishes between countries based on legal aspects, statutory audit and independent oversight of financial reporting) and public and private enforcement in securities markets (La Porta et al. 2006) are more closely associated with properties of analysts’ forecasts than more general regulation proxies such as Kaufmann et al. (2007). The accounting enforcement proxies are statistically significant variables in our models, indicating analysts’ forecasts are more accurate and less disperse when enforcement is more developed. However, overall we find that enforcement proxies do not strongly influence the size of the forecast error or the extent to which analysts disagree, suggesting that country institutional differences may be less important than is commonly believed.