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The Accounting Review Vol. 83 No. 3 2008

International GAAP Differences: The Impact on Foreign Analysts

Kee‐Hong Bae1; Hongping Tan2; Michael Welker3

1 a Queen's University · 2 b University of Northern British Columbia · 3 c Queen's University.

Abstract

This paper investigates the relation between differences in accounting standards across countries and foreign analyst following and forecast accuracy. We develop two measures of differences in generally accepted accounting principles (GAAP) for 1,176 country-pairs. We then examine the impact of these measures of accounting differences on foreign analysts. In so doing, we utilize a unique database that identifies the location of financial analysts around the world, creating a sample that covers 6,888 foreign analysts making a total of 43,968 forecasts for 6,169 firms from 49 countries during 1998–2004. We find that the extent to which GAAP differs between two countries is negatively related to both foreign analyst following and forecast accuracy. Our results suggest that GAAP differences are associated with economic costs for financial analysts.

DOI
10.2308/accr.2008.83.3.593
Volume
83
Issue
3
Pages
593-628
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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