Cross-Listing in Us Markets and Conservatism: Does Type of Listing Matter?

21 Pages Posted: 27 Sep 2005

See all articles by Martien Jan Peter Lubberink

Martien Jan Peter Lubberink

Victoria University of Wellington - School of Accounting and Commercial Law

Carel Huijgen

University of Groningen - Faculty of Economics and Business

Date Written: September 13, 2005

Abstract

This paper examines conditional accounting conservatism (Basu, 1997) of international firms cross-listed on United States stock exchanges. We compare the conservatism of firms that cross-list choosing a US ADR programme offering the possibility to raise equity capital (ADR Level III) to similar firms that choose to not raise capital in US markets (ADR Level II). Our results show that the firms that have the option to raise capital display a higher level of conservatism than the firms that do not have that option. The difference in conservatism is more pronounced for firms from Common Law countries than for Code Law countries. This evidence suggests that firms intending to issue equity capital in order to finance future growth possibilities will provide credible and verifiable earnings information to investors. This puts into question the suggestion of Ball et al. (2005) that the demand for conservative accounting predominantly originates from debt markets.

Keywords: International financial reporting, conservatism, cross-listings, bonding

JEL Classification: M40

Suggested Citation

Lubberink, Martien Jan Peter and Huijgen, Carel A., Cross-Listing in Us Markets and Conservatism: Does Type of Listing Matter? (September 13, 2005). Available at SSRN: https://ssrn.com/abstract=803264 or http://dx.doi.org/10.2139/ssrn.803264

Martien Jan Peter Lubberink

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

New Zealand
+64 4 463 5968 (Phone)

Carel A. Huijgen (Contact Author)

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

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

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