Disclosure Under IFRS: Does the Legal Origin Disclosure Gap Persist for Cross-Listed Firms?

49 Pages Posted: 24 Apr 2017 Last revised: 24 Oct 2019

See all articles by Edilene Santana Santos

Edilene Santana Santos

Fundacao Getulio Vargas (EAESP); Getulio Vargas Foundation (FGV) - Sao Paulo School of Business Administration

Rafael F. Schiozer

Fundação Getulio Vargas/EAESP

Vera Ponte

Universidade Federal do Ceará

Date Written: October 22, 2019

Abstract

This study investigates whether the influence of the US environment on firms cross-listed in the US is associated with the reduction in the disclosure deficiencies related to firms’ legal traditions. We analyze the levels of compliance with the disclosures required by International Accounting Standard (IAS) 24 concerning related party transactions and perform a double-differences comparison. First, we compare firms from different legal origins (common law versus civil law), and second, we compare the cross-listing status (cross-listed in the US versus domestically listed only) of a panel sample of firms from countries in which International Financial Reporting Standards (IFRS) are mandatory. For domestically listed firms, we find that firms from the common law tradition have disclosure levels superior to those of firms from the civil law tradition. We find that the main reason for the differences in disclosure for these firms is regulatory quality. However, we do not find any differences in the level of disclosure among firms cross-listed in the US that can be associated with firms’ legal origin. Our results suggest that the regulatory enforcement and scrutiny of capital markets imposed by the US market compensate for home-country institutional deficiencies and mitigate differences in firms’ disclosure across legal origins.

Keywords: cross-listing, mandatory disclosure, legal origin, enforcement, regulatory quality

JEL Classification: M41, M48, G15, G14, F33, F21

Suggested Citation

Santos, Edilene Santana and Schiozer, Rafael F. and Ponte, Vera, Disclosure Under IFRS: Does the Legal Origin Disclosure Gap Persist for Cross-Listed Firms? (October 22, 2019). Available at SSRN: https://ssrn.com/abstract=2956918 or http://dx.doi.org/10.2139/ssrn.2956918

Edilene Santana Santos (Contact Author)

Fundacao Getulio Vargas (EAESP) ( email )

Avenida Nove de Julho, 2029.
Sao Paulo - SP, 01.313.902
Brazil

HOME PAGE: http://eaesp.fgvsp.br/

Getulio Vargas Foundation (FGV) - Sao Paulo School of Business Administration ( email )

Sao Paulo
BRAZIL

Rafael F. Schiozer

Fundação Getulio Vargas/EAESP ( email )

Sao Paulo
Brazil
55 11 32817700 (Phone)
55 11 32841789 (Fax)

HOME PAGE: http://www.fgvsp.br

Vera Ponte

Universidade Federal do Ceará ( email )

Av da Universidade 2486
Fortaleza, Ceará 60160080
Portugal

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