As Foreign Registrants Abandon the U.S. Capital Markets, What Happens to the Cross-Listing Audit Fee Premium?

41 Pages Posted: 16 Apr 2016

See all articles by Kathleen Bakarich

Kathleen Bakarich

Hofstra University - Department of Accounting, Taxation and Legal Studies in Business

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy

Date Written: April 14, 2016

Abstract

Foreign firms cross-listing in the U.S. benefited from increased accounting quality and valuation stemming from the historically more stringent accounting and regulatory environment in the U.S. compared to their home markets. Auditors of these foreign firms, also facing this more rigorous reporting regime, charged a cross-listing audit fee premium. However, recent events have caused an increase in these firms leaving U.S. markets. Using a sample of cross-listed firms from 2004-2013 that voluntarily delisted and deregistered from U.S. markets and reporting requirements, we find that deregistration is associated with a decrease in audit fees for firms returning to non-IFRS environments and additional tests show the level of legal liability in the home market, relative to the U.S., is not a significant mitigating factor in this negative association between deregistration and audit fees. These findings indicate that, after controlling for country and legal effects, firms returning to IFRS jurisdictions do not experience a significant change in the complexity of their accounting environments, mitigating the impact of deregistration on audit fees, implying that selected markets outside of the U.S. have established comparable reporting regimes.

Keywords: Audit fees, IFRS, deregistration, cross-listing

JEL Classification: M4, M40, M41

Suggested Citation

Bakarich, Kathleen and Weintrop, Joseph, As Foreign Registrants Abandon the U.S. Capital Markets, What Happens to the Cross-Listing Audit Fee Premium? (April 14, 2016). Available at SSRN: https://ssrn.com/abstract=2765077 or http://dx.doi.org/10.2139/ssrn.2765077

Kathleen Bakarich (Contact Author)

Hofstra University - Department of Accounting, Taxation and Legal Studies in Business ( email )

United States

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
212-802-6443 (Phone)
212-802-6423 (Fax)

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