Abstract

We examine whether current disclosure requirements affect foreign firms’ decisions to list on a US exchange. We document that (1) while firms from a weak disclosure environment are more likely to cross-list and either trade OTC or be placed privately, they are less likely to list on an exchange in which firms are required to comply with US GAAP, (2) exchange-listing firms receive a higher valuation than non-exchange-listing firms, and (3) exchange-listing firms domiciled in a higher disclosure regime, who incur lower costs of US GAAP compliance, generally receive a higher valuation than exchange-listing firms from a lower disclosure regime.

top

Abstract

This paper investigates financial analysts’ predictive power of future performance and earnings quality, using a sample of firms cross-listed in the US. We find that analyst coverage is positively related to analysts’ expectations about firms’ future performance and negatively related to analysts’ concern over firms’ earnings quality. Country-level legal origin and disclosure index are two significant determinants of analyst coverage of cross-listed firms. In addition, the intensity of analyst coverage can predict future abnormal stock price performance. While documenting the substantial informational benefits to cross-listing, our study suggests that these benefits may not be complete since analysts appear to have predictive power and selectively provide coverage for firms with favorable future prospects.

top

Abstract

This paper evaluates China’s regulatory enforcement in 2001 on the harmonization of accounting practices. We find that the Chinese Government’s 2001 compulsory harmonization policy has made a significant contribution to reducing the differences between Chinese GAAP-based earnings and IFRS-based earnings for many line items. The decline of earnings differences is because of the firms’ application of the standards rather than differences in the standards. We believe that the harmonization of accounting practices in line with IFRS can be achieved by effective enforcement of standards.

top