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An International Meeting of American Accounting
Association
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A Comparison of Improvement in Earnings Attributes by U.S. Foreign Registrants: Common Law Countries vs. Code Law Countries |
Shu - Wei Hsu
Tunghai University
Fujiing Shiue
National Taipei University
Jan - Zan Lee
National Taipei University
Abstract: The purpose of this research is to investigate how the earnings attributes of cross-listed firms are affected by the stricter U.S. legal system. The incentives of managers of foreign registrants are expected to be reshaped by the stricter U.S. legal regulations and environment, as characterized by strong investor protection. It is therefore hypothesized that strong legal framework will mitigate the need for earnings manipulation and lead to the improvement in earnings attributes on the part of foreign registrants. Using 802 cross-listed firms across 40 countries, this research tests whether the earnings attributes are improved following cross-listing. Generally, the empirical result has shown that non-U.S. firms improve their earnings attributes following cross-listing on U.S. securities markets, and the magnitude of improvement is negatively related to the level of investor protection in their respective home countries.