An investigation of the comparative impact of degree of implementation of IFRS upon the public and private information quality of East and West European firms

This research investigates the comparative quality of public and private information environments between firms domiciled in European countries characterized as being West European or East European for 29 European countries, 12 of which are characterized as being East European. Our empirical analyses examine the comparative quality of public and private information components of equity securities analysts' earnings forecasts for West European and East European firms while controlling for (1) firms cross-listing on U.S. equity securities exchanges, and (2) country of domicile degree of implementation of IFRS. Our results indicate that (1) the quality of private information is higher for East European compared with West European countries of domicile, and (2) the quality of public information is higher for West European compared with East European countries of domicile. Furthermore, particularly noteworthy is that our results indicate that (1) country of domicile degree of implementation of IFRS increases the quality of public information and decreases the quality of private information for both East European and West European countries of domicile, and (2) that the decrease in the quality of private and increase in the quality of public information associated with degree of implementation of IFRS are significantly more pronounced for East European relative to West European countries of domicile. We believe our results suggest that the IFRS are on the margin more beneficial for East European countries than for West European countries in the sense of reducing information asymmetry by moving important information regarding prospective firm performance from the private into the public domain.