Investor protection,cross-listing and accounting quality |
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Institution: | 1. University of South Dakota, Department of Accounting & Finance, Beacom School of Business, 414 East Clark Street, Vermillion, SD 57069, United States of America;2. University of Texas Rio Grande Valley, Department of Economics & Finance, Robert C. Vackar College of Business & Entrepreneurship, 1201 W. University Drive, Edinburg, TX 78539, United States of America;3. East Carolina University, Department of Finance, College of Business, 1001 East 5th Street, Greenville, NC 27858, United States of America |
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Abstract: | Using 42,808 firm-year observations from 32 countries around the world, we investigate whether cross-listing in the US is associated with better accounting quality, and whether investor protection moderates the effect of cross-listing on accounting quality. Our main results show firms that are cross-listed in the US exhibit more timely reporting of losses, greater tendency to manage earnings downward, and more value relevance of accounting numbers as compared to their domestic counterparts. Cross-listed firms originating from high investor protection jurisdictions, particularly in high anti-director rights and common law countries, exhibit greater tendency to recognise a more timely reporting of losses and to manage earnings downward but exhibit lower value relevance of earnings as compared to cross-listed firms domiciled in low anti-director rights and non-common law countries. These results suggest that the strength of investor protection in home country plays an important role in determining the quality of accounting numbers of cross-listed firms. |
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Keywords: | Cross-listing Accounting quality Earnings management Value-relevance Conservatism G38 G18 M41 M43 M44 |
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