Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms

This paper examines the relation between accounting choice and U.S. institutional investor ownership in non‐U.S. firms. We predict that U.S. investors exhibit home bias in their preference for accounting methods conforming to U.S. Generally Accepted Accounting Principles (GAAP) because such methods are more familiar, reduce information processing costs, and are perceived as higher quality. We find that firms exhibiting higher levels (changes) of U.S. GAAP conformity have greater levels (changes) of U.S. institutional ownership. Lead‐lag regressions suggest that increases in U.S. GAAP conformity precede increases in U.S. investment, but changes in U.S. institutional holdings do not precede changes in accounting methods. We also find that the positive relation between U.S. GAAP conformity and U.S. investment holds regardless of a firm's visibility to U.S. investors (e.g., American Depositary Receipt listing, stock index membership, analyst following, firm size). However, we find that U.S. GAAP conformity has a significantly greater impact among firms already visible to U.S. investors.     

美国国际投资头寸的规模与结构变迁

20世纪80年代以来,美国的对外债权和对外债务相对快速增长,由于对外债务的增速快于对外债权的增速,形成了庞大的美国国际投资净债务头寸,美国已经由一个对外净债权国演变成一个对外净债务国,而且对外净债务还在急速膨胀。美国政府部门对外净债务是美国对外净债务头寸的主要构成部分,外国政府部门则持有大部分对美国的净债券,正是庞大的美国政府财政赤字造成了美国的对外净债务,也正是外国政府部门持有的外汇储备支撑了美国政府的财政赤字。     

IAS Versus U.S. GAAP: Assessing the Quality of Financial Reporting in South Africa,the United Kingdom,and the United States

In this study, we investigate whether financial reporting, using International Accounting Standards (IAS) results in quality disclosures, given differences in institutional and market forces across legal jurisdictions. This study contributes to the global accounting debate by utilizing U.S.-based companies complying with U.S. Generally Accepted Accounting Principles (U.S. GAAP) as a benchmark for measuring the quality of IAS as applied by South Africa (S.A.) and United Kingdom (U.K.) companies. Although South Africa, United Kingdom, and the United States are common law countries with strong investor protection, South Africa's institutional factors and market forces vary from that of the U.K. and the U.S. South Africa's financial market is less developed than that of the U.K. and the U.S. We compare the discretionary accruals of firms complying with U.S. GAAP to the discretionary accruals of U.K. and S.A. firms complying with IAS. This allows a comparison between companies (S.A. and U.K.) operating under different institutional factors and market forces that have adopted IAS versus U.S. companies that report under U.S. GAAP. Our sample, consisting of U.S., S.A., and U.K. listed firms, contains 3,166 firm-year observations relating to the period 1999–2001. The results of our study indicate that S.A firms utilizing IAS report absolute values of discretionary accruals that are significantly greater than absolute values of discretionary accruals of U.S. firms utilizing U.S. GAAP. In contrast, U.K. firms utilizing IAS report discretionary accruals that are significantly less than the discretionary accruals of companies in the United States reporting under U.S. GAAP. This study contributes to the literature by providing evidence of the quality of financial information prepared under IAS and its dependency on the institutional factors and market forces of a country.     

Individual investors’ attitudes towards listing requirements for foreign entities on U.S. stock exchanges and the promulgation of international accounting standards

The Securities and Exchange Commission (SEC) currently requires foreign issuers of securities listed on U.S. securities exchanges to either employ U.S. generally accepted accounting principles (U.S. GAAP) or include a statement of reconciliation to U.S. GAAP if they use their home country's accounting standards. With some exceptions, they are also required to comply with the provisions of the Sarbanes-Oxley Act of 2002 (SOA). John Thain, CEO of the New York Stock Exchange, states that these requirements hamper U.S. investments, economic growth, and employment opportunities. The Chairman of the International Accounting Standards Board (IASB), Sir David Tweedie, echoed Thain's comments. An important stakeholder who is affected significantly by the U.S. listing requirements is the U.S. individual investor. Accordingly this study examines their attitudes involving the extant rules for foreign listings on U.S. exchanges and other aspects of the issue. The study also examines their perceptions regarding accounting standard promulgation authority and the use of a global set of accounting principles. The results indicate that although U.S. investors are very much in favor of the listing of foreign companies on U.S. exchanges, they also endorse the current rule requiring either employment of U.S. GAAP or reconciliation to it as well as mandatory adherence to the SOA. In the area of accounting standards, although a large majority believed that the U.S. should control the accounting standards for U.S. listings, a smaller majority also believed that there should be a universal set of accounting principles for all stock exchanges.     

The Announcement Effects of U.S. versus non‐U.S. Bank Mergers: Do They Differ?

Non‐U.S. bank mergers are becoming an increasingly important part of the worldwide economic landscape. Are the market reactions to non‐U.S. bank mergers similar to the reaction in the United States? I address this question by examining abnormal returns of publicly traded partners on the announcement of forty‐one non‐U.S. bank mergers and comparing the returns with a U.S. control group. I find acquirers in non‐U.S. domestic bank mergers earn more and non‐U.S. targets earn less than their U.S. counterparts. However, for the subset of mergers in countries with relatively well‐developed stock markets, I find that partners earn similar returns.     

U.S. Equity Investment in Emerging Stock Markets

This article examines U.S. equity flows to emerging stock marketsfrom 1978 to 1991 and draws three main conclusions. First, despitethe recent increase in U.S. equity investment in emerging stockmarkets, the U.S. portfolio remains strongly biased toward domesticequities. Second, of the fraction of the U.S. portfolio thatis allocated to foreign equity investment, the share investedin emerging stock markets is roughly proportional to the shareof the emerging stock markets in the global market capitalizationvalue. Third, the volatility of U.S. transactions in emerging-marketequities is higher than in other foreign equities. The normalizedvolatility of U.S. transactions appears to be falling over time,however, and we find no relation between the volume of U.S.transactions in foreign equity and local turnover rates or volatilityof stock returns.     

On Consumer Credit Outcomes in the U.S.-Mexico Border Region

The ease in mobility of people across the U.S.-Mexico border region provides a natural setting for analyzing the role of economic interdependency on consumer credit outcomes. Since the U.S. and Mexican economies are not entirely synchronized and have different growth rates, the growing Mexican border economy is likely to increase the consumption of U.S. goods and services in the region, and provide additional job opportunities to the U.S. border residents. Thus, the effect of being located at the border (‘border effect’) might reduce default and bankruptcy in the U.S. However, if both economies are nearly perfectly correlated, then the ‘border effect’ is likely to be insignificant. Our results are consistent with the border effect lowering the rate of bankruptcies and mortgage defaults in the U.S. counties that share a border with Mexico. An increase in the level of economic interdependency, as measured by the differential economic growth between Mexican municipalities and their sister U.S. county, decreases the bankruptcy rates in the U.S. border region. Overall, this research helps understand credit risk issues in the U.S.-Mexico border region.     

Sources of Fluctuations in Islamic,U.S., EU,and Asia Equity Markets: The Roles of Economic Uncertainty,Interest Rates,and Stock Indexes

This article analyzes the economic and financial sources of fluctuations among the U.S. federal funds rates, the U.S. economic policy uncertainty, and the indices of the U.S., European, Asian, and Islamic stock markets. The impulse response analysis shows that the U.S. economic policy uncertainty shocks have significant and negative effects unanimously on the U.S., European, Asian, and Islamic stock markets. A contractionary monetary policy shock, in terms of a higher federal funds rate, has also a statistically significant and negative effect on all of the stock markets. The variance decomposition results indicate that the Islamic stock index is mainly affected by the U.S. stock index shock, thus negating its dichotomy hypothesis. The U.S. economic uncertainty shock explains an important portion of fluctuations for all four stock indices. The degree of synchronization between the EU stock market and other markets has weakened after the U.S. financial crisis.     

寻求平衡:数字科技与美国版权法(英文)

由于美国版权法在数字时代发生很大变化,这就又引起美国版权学者的重视,主要这是由于数字科技快速发展而导致。本文试图从数字科技发展角度作为研究视角,结合数字时代美国版权法的变化,从而分析美国版权法与数字科技之间是如何寻求平衡。得出维护作者的权利是维持数字科技发展与美国版权法之间平衡的关键。     

TRADING COSTS OF NON‐U.S. STOCKS ON THE NEW YORK STOCK EXCHANGE: THE EFFECT OF INSTITUTIONAL OWNERSHIP,ANALYST FOLLOWING,AND MARKET REGULATION

We investigate the differences in market microstructure between U.S. and non‐U.S. stocks cross‐listed on the New York Stock Exchange using a sample of 316 pairs of matched stocks. We find that non‐U.S. stocks have wider spreads and larger adverse‐selection costs than U.S. stocks even after controlling for macro‐level institutional differences. Regression analysis shows that spreads and adverse‐selection costs are negatively correlated with institutional ownership and analyst followings. Thus, the higher spreads and adverse‐selection costs for non‐U.S. stocks can be partly explained by the lower institutional ownership and analyst following of non‐U.S. stocks. In addition, we find that although the spreads and adverse‐selection costs for non‐U.S. stocks are significantly higher before the implementation of Regulation Fair Disclosure (FD), the differences become even greater after Regulation FD, suggesting that Regulation FD has improved the information environment for U.S. stocks.     

Cross-Border Listings and Price Discovery: Evidence from U.S.-Listed Canadian Stocks

We examine the contribution of cross-listings to price discovery for a sample of Canadian stocks listed on both the Toronto Stock Exchange (TSE) and a U.S. exchange. We find that prices on the TSE and U.S. exchange are cointegrated and mutually adjusting. The U.S. share of price discovery ranges from 0.2 percent to 98.2 percent, with an average of 38.1 percent. The U.S. share is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the U.S. exchange and the TSE, and inversely related to the ratio of bid-ask spreads.     

Analysts' forecasts of Japanese firms' earnings: additional evidence

This article examines analysts' forecasts of Japanese firms' earnings during Japan's economic burst period in the 1990s. Using the evidence of analyst earnings forecasts in the United States as a benchmark, the article documents the following three findings. First, whereas the forecast accuracy of U.S. analysts following U.S. firms improves over time, the forecast accuracy of U.S. and Japanese analysts following Japanese firms does not. Second, whereas decreases in forecast errors of U.S. analysts following U.S. firms are best explained by decreases in forecast bias of the analysts, increases in forecast errors of U.S. and Japanese analysts following Japanese firms are best explained by increases in the frequency of losses experienced by Japanese firms. Third, Japanese analysts forecast earnings less accurately than do U.S. analysts. These findings reflect the difficulty of producing accurate earnings forecasts during economic downturns. They also suggest that Japanese analysts are more bound than their U.S. counterparts by cultural ties that impede forecast accuracy.     

A test of the firm characteristics hypothesis for LIFO choice of Canadian firms

This paper examines whether characteristics of Canadian firms can explain the observed difference in the use of LIFO for valuing inventory between the U.S. and Canada. Characteristics that help explain the choice between LIFO and FIFO use in the U.S. are used to compare Canadian firms to U.S. LIFO users and FIFO users separately. If Canadian firms are characteristically similar to U.S. FIFO users, then the firm characteristics hypothesis would be supported and LIFO would be infrequently used in Canada because few firms are LIFO-like in their underlying characteristics. Univariate nonparametric tests are used to compare U.S. and Canadian firms in the same industries on both an unmatched and matched basis. The results of this comparison indicate that Canadian average cost firms have more characteristics in common with U.S. LIFO users than FIFO users and Canadian FIFO firms have characteristics like both U.S. FIFO and U.S. LIFO firms. Logit models were estimated using the U.S. firms. These models predict that between three and 28% of Canadian firms would use LIFO. Thus, the firm characteristics explanation for infrequent use of LIFO in Canada is not supported by the data. These results imply that several Canadian firms may use LIFO if the institutional setting in Canada was more like that in the U.S.     

The Influence of U.S. GAAP on the Harmony of Accounting Measurement Policies of Large Companies in the U.K. and Australia

U.S. GAAP has increasingly become an influence on accounting practices in other countries, even aside from those traditionally considered under direct U.S. influence. The change arises from the large number of U.S. accounting standards, non-U.S. companies listing on U.S. stock exchanges, and the amount of U.S. direct investment abroad. As the impact of U.S. GAAP varies across countries, it may affect international accounting harmony. This idea is tested by examining the level of international harmony for eleven accounting measurement policies in matched pairs of large companies from Australia and the U.K., two countries with historically strong cultural and economic links. It is argued that, in recent decades, accounting practice in Australia, more so than in the U.K., has become increasingly U.S.-oriented. The concepts of harmony of Tay and Parker (1990) and Archer et al . (1996) are employed. International harmony is measured by the between-country C index and chi-square test; national harmony by van der Tas's (1988) H index. While considerable national harmony is found in the U.K. for seven and in Australia for five accounting policies, there is considerable or complete international harmony for only three policies. Evidence is presented of the influence of U.S. GAAP as one factor explaining the poor degree of U.K./Australia international harmony. Australian companies appear to follow U.S. GAAP to a greater extent than do U.K. companies. The state of partial harmony thus existing restricts international comparability of accounting reports and may cause problems for regulators.     

美国经济衰退的国际相关性实证研究

本文采用事件窗口分析方法,研究美国近7次经济衰退与主要发达国家、亚洲四小龙的关系。发现美国经济衰退的国际相关性是动态变化的,其中1973年、1980年和2001年是国际相关性最高的3次衰退;新一轮经济周期当中东亚四小龙金融变量与美国高度相关,超过了实体经济变量与美国的相关性。此外,本文还分析了美国与其他国家或地区经济衰退的领先、滞后关系。     

加征关税如何影响美国贸易逆差及全球福利——基于美元本位下两国动态一般均衡框架的分析

本文构建了一个包含美元本位特征的两国模型,在此基础上分析了美国加征关税及引发的贸易摩擦对美国贸易逆差和全球福利的影响,并详细探讨了相关传导机制。在基准模型设定下,美国单方面加征20%关税会使得美国贸易逆差占GDP比重小幅缩小约0.40个百分点,美国长期稳态GDP下降约2.50%,其他国家GDP下降约1.10%,美国居民福利上升约0.60%,其他国家居民福利下降约1.20%。美国单方面加征关税在抑制全球贸易和生产的同时,会通过更加不公平的国际贸易恶化全球福利分配。当其他国家采取报复性措施时,其他国家自身福利并不会进一步恶化,但美国福利会大幅下滑,同时美国贸易逆差相对规模变化不大。贸易摩擦博弈的“囚徒困境”特征在一定程度上能够解释贸易战的发生。削弱美元本位地位能促进国际贸易公平性的提升,进而能减弱贸易摩擦带来的负面影响、提升全球福利水平,并能有效缩窄美国贸易逆差。     

The Amount and Timing of Goodwill Write-Offs and Revaluations: Evidence from U.S. and U.K. Firms

This paper investigates criticisms that U.S. GAAP had given firms too much discretion in determining the amount and timing of goodwill write-offs. Using 1,576 U.S. and 563 U.K. acquisitions, we find little evidence that U.S. firms managed the amount of goodwill write-off or that U.K. firms managed the amount of revaluations (write-ups of intangible assets). However, our results are consistent with U.S. firms delaying goodwill write-offs and U.K. firms timing revaluations strategically to avoid shareholder approval linked to certain financial ratios.     

加征关税如何影响美国贸易逆差及全球福利——基于美元本位下两国动态一般均衡框架的分析

本文构建了一个包含美元本位特征的两国模型,在此基础上分析了美国加征关税及引发的贸易摩擦对美国贸易逆差和全球福利的影响,并详细探讨了相关传导机制。在基准模型设定下,美国单方面加征20%关税会使得美国贸易逆差占GDP比重小幅缩小约0.40个百分点,美国长期稳态GDP下降约2.50%,其他国家GDP下降约1.10%,美国居民福利上升约0.60%,其他国家居民福利下降约1.20%。美国单方面加征关税在抑制全球贸易和生产的同时,会通过更加不公平的国际贸易恶化全球福利分配。当其他国家采取报复性措施时,其他国家自身福利并不会进一步恶化,但美国福利会大幅下滑,同时美国贸易逆差相对规模变化不大。贸易摩擦博弈的“囚徒困境”特征在一定程度上能够解释贸易战的发生。削弱美元本位地位能促进国际贸易公平性的提升,进而能减弱贸易摩擦带来的负面影响、提升全球福利水平,并能有效缩窄美国贸易逆差。     

What drives cross-market correlations during the United States Q.E.?

This paper investigates the dynamic cross-market correlations and its crucial drivers between the United States (U.S.) stock and currency market and foreign markets during the U.S. Quantitative Easing (QE) periods. We focus on countries with strong trade and financial linkages with the U.S., including Australia, Canada, and Mexico. Our empirical analyses deliver important findings. First, we consistently find positive (negative) correlations between the U.S. equity (currency) market and financial assets of the three foreign countries under the scenario of the U.S. QE. Second, the magnitude of the conditional correlations tends to be strengthened during the initiation of the U.S. QE1 but was weakened during the U.S. QE3. Lastly, we find that U.S. treasury yields and term premium were among the most significant economic drivers of the markets' linkages during both QE1 and QE3 but in an opposite role. Meanwhile, the expected uncertainty in the bond market additionally contributed to drive the markets' interrelationship during the QE2. Our findings deliver important information to investors and policymakers to anticipate the dynamics of market linkages under U.S. QE scenarios.     

Will the U.S. bank recapitalization succeed? Eight lessons from Japan

During the financial crisis that started in 2007, the U.S. government has used a variety of tools to try to rehabilitate the U.S. banking industry. Many of those strategies were also used in Japan to combat its banking problems in the 1990s. There are also a surprising number of other similarities between the current U.S. crisis and the recent Japanese crisis. The Japanese policies were only partially successful in recapitalizing the banks until the economy finally started to recover in 2003. From these unsuccessful attempts, we derive eight lessons. In light of these eight lessons, we assess the policies the U.S. has pursued. The U.S. has ignored three of the lessons and it is too early to evaluate the U.S. policies with respect to four of the others. So far, the U.S. has avoided Japan's problem of having impaired banks prop up zombie firms.