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Abstract
Prior research shows that mandatory IFRS adoption provided some benefits for financial
analysts. We extend this literature by investigating whether switching back from IFRS to local
GAAP reduces these benefits. More precisely, we analyze the impact of such a switch on target
price errors in Switzerland, where several firms have decided to abandon IFRS and use Swiss
GAAP. Our cross-sectional analysis shows that analysts’ errors are significantly lower for firms
applying IFRS. The results from our staggered difference-in-differences suggest a significant
increase in the absolute target price errors after a switch from IFRS to Swiss GAAP. Thus, we
conclude that target price accuracy decreases when opacity increases. However, analysts are
usually more optimistic about firms using IFRS, and analyst optimism significantly decreases
after a switch from IFRS to Swiss GAAP. This latter finding suggests that analysts become
more prudent when opacity increases. Overall, we conclude that switching back from IFRS to
local GAAP has some negative and some positive consequences for financial analysts.