Comparative Loss Recognition Timeliness Between Brazilian ADR Issuers and Non Issuers and Between American and Brazilian Accounting Systems

36 Pages Posted: 18 May 2008

See all articles by Antonio Carlos Coelho

Antonio Carlos Coelho

UFC - FEAAC - PPAC

Joanilia Sales Cia

Universidade de São Paulo

Josilmar C. Cia

Universidade Presbiteriana Mackenzie

Iran Siqueira Lima

University of São Paulo (USP)

Date Written: May 16, 2008

Abstract

The article examines the differences, in terms of information quality (conditional conservatism), of the accounting reports of Brazilian ADR issuers and non issuers. We compare loss recognition timelines in the Brazilian public firms' financial statements. We also examine the demonstrations reported in the two accounting systems (BRGAAP and USGAAP), using the Reversal Transitory Components-based Model of Basu (1997) and the Accrual-based Model of Ball and Shivakumar (2005). The hypotheses consider that there are no differences in the degrees of conditional conservatism between the two groups of firms, due to contractual and institutional similarities affecting the two groups; the inexistence of incentives to modify managers' behavior by the process of cross listing; and adopting different accounting principles is not enough to motivate managers to report conservative earnings to investors. The tests confirm these hypotheses with models using panel data methods of estimation with a sample of 331 firms from 1993 to 2005. The results present low coefficients of determination and statistical significance.

Keywords: earnings quality, conservatism, loss recognition, cross listing, GAAP, ADR, emerging markets, Brazil

JEL Classification: M41, M44, M47, D82, K22, N26

Suggested Citation

Coelho, Antonio Carlos Dias and Cia, Joanilia Sales and Cia, Josilmar Cordenonssi and Lima, Iran Siqueira, Comparative Loss Recognition Timeliness Between Brazilian ADR Issuers and Non Issuers and Between American and Brazilian Accounting Systems (May 16, 2008). Available at SSRN: https://ssrn.com/abstract=1134109 or http://dx.doi.org/10.2139/ssrn.1134109

Antonio Carlos Dias Coelho (Contact Author)

UFC - FEAAC - PPAC ( email )

Avenida da Universidade, 2431
Benfica
Fortaleza, Ceara 60.020-180
Brazil
+ 55 85 3366 7802 (Phone)

HOME PAGE: http://www.feaac.ufc.br

Joanilia Sales Cia

Universidade de São Paulo ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

HOME PAGE: http://www.fea.usp.br

Josilmar Cordenonssi Cia

Universidade Presbiteriana Mackenzie ( email )

Rua da Consolação, 930
São Paulo, SP 01302-907
Brazil
+55 11 2114-8273 (Phone)

HOME PAGE: http://www.mackenzie.com.br

Iran Siqueira Lima

University of São Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

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