Earnings conservatism, litigation, and contracting: the case of cross-listed firms

Huijgen, C and Lubberink, Martien (2005) Earnings conservatism, litigation, and contracting: the case of cross-listed firms. Journal of Business Finance and Accounting, 32 (7-8). pp. 1275-1309. ISSN 0306-686X

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Abstract

We compare earnings conservatism of UK companies cross-listed in the US to that of UK companies without a US-listing. We expect that conservatism will be more pronounced for cross-listed firms than for firms with a UK listing only, because the cross-listed firms face a stricter enforcement regime. Furthermore, cross-listed firms may use a listing on a US exchange to signal high-quality reporting to investors. Using a matched-pairs research design, we find that earnings of UK cross-listed firms are significantly more conservative than earnings of UK firms without a US listing. Moreover, cross listed firms display particularly high levels of conservatism during the early years of their cross-listing. This indicates that firms use earnings conservatism to commit to highly demanding reporting requirements and in doing so communicate a perception of investor care.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Business Finance and Accounting
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
ID Code:
43903
Deposited By:
Deposited On:
11 Jul 2011 18:06
Refereed?:
Yes
Published?:
Published
Last Modified:
01 Jul 2020 09:42