RESUMO DO TRABALHO

Código: 97

Área Temática: Área III: Contabilidade Financeira

Título: Compliance with IFRS Required Disclosure and Analysts� Forecast Errors: Evidence from Brazil

Resumo:
Prop�sito do Trabalho:
We analyze the relationship between analysts' earnings forecast errors and Brazilian listed firms� compliance with International Financial Reporting Standards (IFRS) required disclosure. We examine whether the variance in firms� disclosure compliance levels in the Notes to financial statements for 2010 and 2012 affects analysts� earnings forecast errors for 2011 and 2013, respectively. Two studies evaluate the influence of IFRS adoption in Brazil on analysts� forecasts (Pessotti, 2012; Gatsios, 2013), finding contradictory results. However, the use of binary variables by these studies, comparing analysts� forecasts before and after IFRS adoption, neglects other evidence finding low or inadequate compliance by numerous Brazilian firms with IFRS required disclosure (Santos, Ponte, & Mapurunga, 2014; Mapurunga, Ponte, Coelho, & Meneses, 2011). Compliance level analysis per firm enables us to consider whether and to what extent firms effectively disclose as required by IFRS (as �IFRS serious adopters�), distinguishing them from firms that mere formally adopt IFRS (as �IFRS label adopters�), without effectively complying with it (see Daske, Hail, Leuz, & Verdi, 2013). As, in fact, no improvement in analysts� earnings forecast accuracy for a firm is expected if this firm has not effectively complied with IFRS disclosures, compliance analysis per firm, as performed in this research, emerges as essential and inherent to the study of analysts� forecast accuracy.

Base da plataforma te�rica:
Akerlof (1970) developed a theory based on the used cars market, according to which sellers� lacking disclosure about bad used cars (�lemons�) causes buyers to mistrust, thus to distance also from good used cars (�plums� or �cherries�); this generates an adverse selection that contaminates all the market. Similarly, resale and corporate securities markets suffer from the problem of asymmetric information, that is, some market participants are better informed than others about the value of the good to be negotiated. Based on this analysis, the theory suggests that only a part of the potential gains of a negotiation is performed. Moreover, information asymmetry can cause agency conflicts. The agency problem arises because minority investors do not normally have the intention to play an active role in the administration of the company and delegate this responsibility to the majority investor (or managers). Consequently, minority investors put their resources at risk when they invest in a company, whose majority has incentive to take decisions that may expropriate the minority shareholders (Jensen & Meckling, 1976). Such problems can be avoided by voluntary firms� disclosure, which is always based on cost / benefits considerations for the firms, thus discouraging disclosure of bad news. Therefore, regulators have the function to establish standards for mandatory disclosure, ensuring that relevant information, even if unfavorable to the reporting firm, will also be available to the market (Dye, 1990, 2001; Healy & Palepu, 2001). In this sense, mandatory accounting disclosure is a key to market efficiency, making relevant information available to investors and enabling effective allocation of resources. Convergence to IFRS, by establishing worldwide standardized accounting principles, enables greater comparability between firms� disclosed information among jurisdictions, and can lead to an increase in disclosure quality, thus reducing both information asymmetry between firms and investors and the cost of capital for companies (Leuz & Verrecchia, 2000). In this context, several studies (Lang & Lundholm, 1996; Hussain, 1997; Barron, Kile, & O�Keefe, 1999; Hope, 2003a, 2003b; Hodgdon, Tondkar, Harless, & Adhikari, 2008; Glaum, Baetge, Grothe, & Oberdorster, 2013; Pessotti, 2012; Gatsios, 2013) seek to examine the relation between disclosure levels and analysts� forecast accuracy, and/or to evaluate whether the adoption of an international recognized standard (US GAAP or IFRS) leads to enhanced disclosure to the market and, consequently, improves the accuracy of the analysts� earnings forecasts. Although the conclusions of these studies are not totally convergent, it is in general expected that the improvement on the quality of the accounting information disclosed can reduce the analysts� earnings forecast errors. Therefore, we test the following hypothesis: The higher the Brazilian firms� compliance with IFRS disclosure requirements is, the smaller is the analysts� earnings forecast errors.

M�todo de investiga��o:
We test the hypothesis by controlling the idiosyncratic firm�s factors that may impact analysts� forecasts. To control effects that do not vary in time, a two years panel data (2010 and 2012) with fixed effects is structured. The dependent variable is the analysts� earnings forecast error for the 123 companies listed on the BM&FBOVESPA for which both forecasted and actual earnings per share (EPS) are available in the database I/B/E/S Earnings Consensus Information for the end of the fiscal year t+1. We calculate the firms� disclosure compliance index from a checklist encompassing 23 standards (CPCs) and 501 items. By analyzing the Notes to financial statements for 2010 and 2012, each IFRS-required disclosure item is coded as disclosed (1), not disclosed (0), or not applicable (NA). We use four alternative models to calculate a firm�s disclosure compliance index, depending on the criterion adopted to establish the applicability of a standard to a firm [criterion 1 (strict) or criterion 2 (tolerant)], and on the approach used to accumulate the overall disclosure index (accumulating by required item or accumulating by standard). We control for other variables influencing analysts� forecast accuracy, as established in previous studies, the regression model is defined as follows: LNERRO i,t + 1= �0 + �1 LNSIZE + �2 LNSIZE2 + �3 SIGN + �4 LNCHANGE + �5 LNCHANGE2 + �6 LNLEVERAGE + �7 LNLEVERAGE2 + �8 LNSDRET + �9 LNSDRET2 + �10 YEAR + �11 LNDISC_n + e Where: LNERRO = natural log of the analysts� earnings forecast errors absolute value (Summary History), for the firm j, in period t; LNSIZE = natural log of the size of the firm, measured by the total assets value of the firm in BRL, at the end of period t for the firm j; SIGN = if the earnings per share (EPS) index is negative in the year (t + 1) and positive in year t, it was considered 1 and 0, otherwise; LNCHANGE = natural log of the alteration percentage of the absolute value of the earnings per share (EPS) index of year (t - 1) to year t; LNLEVERAGE = natural log of the liabilities/Total Assets * 100 (in period t to the firm j); LNSDRET = natural log of the share daily returns standard deviation of the firm j in period t; YEAR = if the year is 2012, it is considered 1 and 0, otherwise; LNDISC_n = natural log of the disclosure index by firm j in period t, using four metrics; ? = error of the model.

Resultados, conclus�es e suas implica��es:
We find overall disclosure compliance levels consistent with those found by Santos et al. (2014), but far below the levels found in other countries: the overall disclosure compliance levels we find for Brazilian firms range from around 20% to 48% (depending on the metric used), while the disclosure levels found by Hodgdon et al. (2008), mainly for Continental European firms a decade before (1999 and 2000), range from 55% to 68%. Using the analysts� consensus from I/B/E/S, results from panel data with fixed-effects indicate a significant negative relationship between firms� disclosure compliance levels (measured accordingly to the two stricter models) and the analysts� earnings forecast errors. These results are controlled for other factors that influence the forecasting error, as explored in previous studies. These results are consistent with other studies (Ashbaugh & Pincus, 2001; Hope 2003a, 2003b; Hodgdon et al., 2008) finding that disclosure is an important determinant of analysts� forecast accuracy. This suggests that increasing levels of compliance with IFRS disclosure requirements improve the information usefulness to financial analysts, leading to an increase in the accuracy of earnings forecasts and to a better targeting of the market in firms� evaluation, thus contributing to reduce the informational asymmetry between firms� managers and market investors. These findings are particularly important to highlight the usefulness of the disclosure required by IFRS for analysts� forecasts, mainly in current days, when the effectiveness of current IFRS disclosure policies is being questioned worldwide, leading the IASB to revisit this issue (IFRS, 2013). This study contributes to better understanding the effects of IFRS adoption in Brazil on analysts� forecast accuracy, since the two studies (Pessoti, 2012; Gatsios, 2013) that examine this question use only binary variables to identify analysts� forecasts error, before and after the IFRS adoption, finding diverging results. Our findings, by confirming that higher analysts� accuracy is associated with higher IFRS disclosure compliance levels, reinforce the idea that firm� compliance with IFRS disclosure requirements is at least as important as an alleged IFRS adoption per se. These findings also may be a contribution from a national environment to international research on this topic, as they emerge from the interaction of conditions that can hinder transparency (code-law tradition, a less efficient capital market and insufficient enforcement) that result in quite lower firms� compliance levels with IFRS required disclosure, compared to that found in more developed markets. Thus, in line with Verrecchia (2001), who pointed out the advantages to study less efficient markets, Brazil�s accounting environment seems to be especially interesting to study the distinction between alleged IFRS adoption versus actual firms� compliance with IFRS required disclosure. Our results suggest that, although a less favorable environment for transparency could reduce the overall perception of the IFRS adoption benefits to financial market, these benefits seem to be better enjoyed by firms that engage more seriously in complying with the IFRS requirements. That is, the market seems to be able to distinguish and reward firms that excel in compliance with IFRS, even in a general atmosphere of low compliance. Besides, by attesting that in the Brazilian context only stricter metrics of disclosure compliance have explanatory power on analysts� forecast errors, our findings have a practical implication, suggesting that firms should be more explicit in disclosing the applicability of a standard to them in order to better obtain the economic benefits associated with the higher accuracy of analysts� forecasts.

Refer�ncias bibliogr�ficas:
Ashbaugh, H., & Pincus, M. (2001). Domestic accounting standards, international accounting standards, and the predictability of earnings. Journal of Accounting Research, 39(3), 417�434. Gatsios, R. C. (2013). Acur�cia e dispers�o das estimativas dos analistas no mercado de capitais brasileiro: Impacto da ado��o do padr�o IFRS sobre a qualidade preditiva da informa��o cont�bil. Tese de Doutorado, Universidade de S�o Paulo, SP, Brasil. Glaum, M., Baetge, J., Grothe, A., & Oberdorster, T. (2013). Introduction of International Financial Standards, disclosure quality and accuracy of analysts� earnings forecasts. European Accounting Review, 22(1), 79-116. Hodgdon C., Tondkar, R. H., Harless, D. W., & Adhikari, A. (2008). Compliance with IFRS disclosure requirements and individual analysts forecast errors. Journal of International Accounting, Auditing and Taxation, 17 (1), 1-13. Hope, O. K. (2003a). Disclosure practices, enforcement of accounting standards, and analysts� forecast accuracy: An international study. Journal of Accounting Research, 41(2), 235�273. Hope, O. K. (2003b). Accounting policy disclosures and analysts� forecasts. Contemporary Accounting Research, 20(2), 295�321. Pessotti, T. (2012). Impacto da converg�ncia �s Normas Cont�beis Internacionais de Contabilidade sobre a Acur�cia dos Analistas do Mercado de Capitais Brasileiro. Disserta��o de Mestrado, Funda��o Instituto Capixaba de Pesquisas em Contabilidade, Economia e Finan�as, Vit�ria, ES, Brasil. Santos, E. S., Ponte, V. M. R., & Mapuranga, P. V. R. (2014). Mandatory IFRS Adoption in Brazil (2010): Index of Compliance with Disclosure Requirements and some Explanatory Factors of Firms Reporting. Accounting & Finance Review, 25(65), 161-176.