LAUSR

Prior literature suggests that the effect of adopting the International Financial ReportingStandards (IFRS) could vary by country-specific or firm-specific factors. In particular, we focus onthe effect of the strength of corporate governance of a firm, a firm-specific characteristic, prior tothe adoption of IFRS. Specifically, we use the Korea Corporate Governance Stock Price Index, ametric for the corporate governance structure in Korea, to examine whether the corporategovernance structure influences the effect of IFRS adoption on the analyst’s earnings forecasts inKorea. We find that the beneficial effect of IFRS adoption on analyst forecast errors is observed forfirms with moderate corporate governance prior to IFRS adoption, but not for firms with superioror inferior corporate governance. We interpret our findings such that firms with strong or weakcorporate governance do not benefit from IFRS adoption, because firms with strong corporategovernance already had transparent information system prior to IFRS adoption and firms withweak corporate governance failed to implement IFRS properly.