The Relationship of Development Status of Investee Countries and Investor Perceptions of Foreign Earnings

International Business & Economics Research Journal, July 2012, Vol. 11, Issue 7, p. 785

Pace University Accounting Research Paper No. 2013/08

Posted: 13 Dec 2013

See all articles by Chen-lung Chin

Chen-lung Chin

National Chengchi University (NCCU) - Department of Accounting

Yu-Ju Chen

Asia University

Gary Kleinman

Montclair State University

Picheng Lee

Pace University - Department of Accounting

Date Written: 2012

Abstract

This study investigates the impact of corporate internationalization and the development status of investee countries on the foreign earnings response coefficient (FERC), which is a measure of the value-relevance of foreign earnings. To improve competitiveness, firms worldwide have expanded aggressively into foreign markets, thereby increasing their exposure to external risks and uncertainties on the one hand, and sources of growth and reward on the other. Using a Taiwanese sample, we found that greater corporate internationalization via investments in developed countries was positively related to the foreign ERC. We expected, and found, that companies can enhance the positive effects of internationalization by investing in countries that are relatively better developed than in countries that are less well developed. The public policy implications of these findings are discussed.

Keywords: internationalization, economic development, value relevance of foreign earnings

JEL Classification: G34, G38, M41

Suggested Citation

Chin, Chen-lung and Chen, Yu-Ju and Kleinman, Gary and Lee, Picheng, The Relationship of Development Status of Investee Countries and Investor Perceptions of Foreign Earnings (2012). International Business & Economics Research Journal, July 2012, Vol. 11, Issue 7, p. 785; Pace University Accounting Research Paper No. 2013/08. Available at SSRN: https://ssrn.com/abstract=2366973

Chen-lung Chin

National Chengchi University (NCCU) - Department of Accounting ( email )

No. 64, Sec 2
Chih-Nan Road
Wenshan, Taipei
Taiwan

Yu-Ju Chen

Asia University ( email )

500 Liuofeng Rd, Wufeng, Taichung
Taichung
Taiwan

Gary Kleinman

Montclair State University ( email )

NJ 07043
United States

Picheng Lee (Contact Author)

Pace University - Department of Accounting ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

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