An Examination of the Comparative Valuation Effects of Enhanced Disclosure and Cross-Listing in the US
32 Pages Posted: 6 Mar 2007 Last revised: 17 Jul 2012
Date Written: July 15, 2012
Using a large sample of international firms we investigate the corporate decisions to voluntarily adopt International Accounting Standards (IAS/IFRS), and to cross-list in the US. We jointly examine these globalization decisions by employing a multinomial logistic model, and use this framework to correct for selection bias in our valuation analysis. We find no significant differences between our documented valuation premia of IFRS and US exchange listed firms. This indicates that cross-listing valuation benefits stem mainly from disclosure enhancement than from the stricter US legal system and that voluntary disclosure can be beneficial even in the absence of a strong legal environment. Furthermore, we find strong evidence that firms from countries with weak investor protection and firms less integrated with the world market benefit more from IFRS adoption. In contrast, we find no evidence that cross-listing on a US exchange is valued more for firms with weaker home country investor protection.
Keywords: Disclosure, IFRS, Cross-Listing, Bonding, Corporate Governance
JEL Classification: G15, G38, G34
Suggested Citation: Suggested Citation