An Economic Analysis of Cross-Listing Decisions and Their Impact on Earnings Quality

Schmalenbach Business Review, Vol. 61, pp. 310-330, July 2009

21 Pages Posted: 3 Dec 2009

Date Written: July 1, 2009

Abstract

I examine the conditions under which entrepreneurs signal the high quality of their projects by cross-listing their firms in a jurisdiction with stricter enforcement of financial reporting regulation. I analyze the effect of these cross-listing decisions on international earnings quality, using a model of earnings management and financial reporting enforcement in which stricter enforcement makes accounting manipulation more costly. The analysis shows that firms can use cross-listing decisions to signal high quality projects even in the absence of listing costs. Cross-listing to a jurisdiction with stricter enforcement sometimes actually increases earnings management and generally leads to less earnings management among firms remaining in the domestic market.

Keywords: Analytical Accounting, Cross-Listing, Earnings Management, Earnings Quality, Enforcement

JEL Classification: G18, M48

Suggested Citation

Koenigsgruber, Roland, An Economic Analysis of Cross-Listing Decisions and Their Impact on Earnings Quality (July 1, 2009). Schmalenbach Business Review, Vol. 61, pp. 310-330, July 2009, Available at SSRN: https://ssrn.com/abstract=1514439

Roland Koenigsgruber (Contact Author)

SKEMA Business School ( email )

Lille
France

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