An Exploratory Study of the Valuation Properties of Cross-Listed Firms' IAS and U.S. Gaap Earnings and Book Values

Posted: 27 Jun 2001

See all articles by Hollis Ashbaugh Skaife

Hollis Ashbaugh Skaife

Graduate School of Management, UC-Davis

Per Olsson

Duke University

Abstract

Despite the increasing integration of global capital markets, there is little evidence on the valuation properties of cross-listed, non-U.S. firms' accounting variables. We use the relative performance of the earnings capitalization, the book value, and the residual income valuation models to explore the valuation properties of International Accounting Standards and U.S. Generally Accepted Accounting Principles earnings and book values reported by non-U.S., cross-listed firms trading in a common equity market. Using non-U.S./non-U.K. firms whose shares trade on the International Stock Exchange Automated Quotation system in London, we find that the earnings capitalization model is the dominant accounting-based valuation model when cross-listed firms report under International Accounting Standards. In contrast, we find that when cross-listed firms report under U.S. Generally Accepted Accounting Principles, the residual income model is the dominant accounting-based valuation model. Our exploratory study provides insights into the valuation implications of allowing a dual reporting system for foreign registrants trading in a common equity market.

Keywords: International Accounting Standards, Valuation, Cross-Listed Firms

JEL Classification: G12, M41, M44, M47

Suggested Citation

Skaife, Hollis Ashbaugh and Olsson, Per Mikael, An Exploratory Study of the Valuation Properties of Cross-Listed Firms' IAS and U.S. Gaap Earnings and Book Values. The Accounting Review, January 2002. Available at SSRN: https://ssrn.com/abstract=272634

Hollis Ashbaugh Skaife (Contact Author)

Graduate School of Management, UC-Davis ( email )

Graduate School of Management
1 Shields Ave
Davis, CA 95616
United States

Per Mikael Olsson

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States

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