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Media type:
E-Article
Title:
Earnings Conservatism, Litigation and Contracting: The Case of Cross‐Listed Firms
Contributor:
Huijgen, Carel;
Lubberink, Martien
Published:
Wiley, 2005
Published in:
Journal of Business Finance & Accounting, 32 (2005) 7-8, Seite 1275-1309
Language:
English
DOI:
10.1111/j.0306-686x.2005.00629.x
ISSN:
1468-5957;
0306-686X
Origination:
Footnote:
Description:
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.