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:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 43903
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 18:06
Refereed?: Yes
Published?: Published
Last Modified: 17 Sep 2019 00:53
URI: https://eprints.lancs.ac.uk/id/eprint/43903

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