Liability Exposure Effects on Earnings Conservatism: The Case of Cross-Listed Firms

Lancaster University, Department of Accounting & Finance Working Paper No. 2001/04; EFMA 2002 London Meetings

50 Pages Posted: 9 Sep 2001

See all articles by Carel Huijgen

Carel Huijgen

University of Groningen - Faculty of Economics and Business

Martien Jan Peter Lubberink

Victoria University of Wellington - School of Accounting and Commercial Law

Date Written: January 2002

Abstract

In this study we investigate earnings conservatism of cross-listed and domestically listed companies. We expect that conservatism will be more pronounced for cross-listed companies because they face the threat of litigation from a wider audience of shareholders than companies with a domestic listing only. Specifically, we compare conservatism of Dutch firms with a listing in the US to conservatism of Dutch firms without a US listing. The motivation to investigate this specific setting is that the liability exposure of managers and auditors in the US market is considered as far more burdensome than in the Dutch market.

Empirical findings for the period from 1993 to 2000 show that Dutch GAAP earnings of cross-listed firms are significantly more conservative than earnings reported by firms with a domestic listing only. This may imply that company managers view their domestic earnings information as the primary mode of communication with their shareholders irrespective of their origin. Further, the results seem to suggest that managers more or less mechanistically apply financial reporting requirements of foreign regulators.

JEL Classification: G14, G38, M41, M44

Suggested Citation

Huijgen, Carel A. and Lubberink, Martien Jan Peter, Liability Exposure Effects on Earnings Conservatism: The Case of Cross-Listed Firms (January 2002). Lancaster University, Department of Accounting & Finance Working Paper No. 2001/04; EFMA 2002 London Meetings, Available at SSRN: https://ssrn.com/abstract=282412 or http://dx.doi.org/10.2139/ssrn.282412

Carel A. Huijgen (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands
+3150 363 7206 (Phone)

Martien Jan Peter Lubberink

Victoria University of Wellington - School of Accounting and Commercial Law ( email )

New Zealand
+64 4 463 5968 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
419
Abstract Views
2,762
rank
78,399
PlumX Metrics