Earnings management and cross listing: Are reconciled earnings comparable to US earnings?

Earnings management and cross listing: Are reconciled earnings comparable to US earnings? We compare US firms’ earnings with reconciled earnings for cross-listed non-US firms. Non-US firms’ earnings exhibit more evidence of smoothing, greater tendency to manage towards a target, lower association with share price and less timely recognition of losses. Firms from countries with weaker investor protection show more evidence of earnings management, suggesting that SEC regulation does not supplant the effect of local environment. There is more evidence of earnings management for firms reconciling to US GAAP than for those preparing local accounts in accordance with US GAAP, but both show more evidence of earnings management than US firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Earnings management and cross listing: Are reconciled earnings comparable to US earnings?

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Publisher
Elsevier
Copyright
Copyright © 2006 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2006.04.005
Publisher site
See Article on Publisher Site

Abstract

We compare US firms’ earnings with reconciled earnings for cross-listed non-US firms. Non-US firms’ earnings exhibit more evidence of smoothing, greater tendency to manage towards a target, lower association with share price and less timely recognition of losses. Firms from countries with weaker investor protection show more evidence of earnings management, suggesting that SEC regulation does not supplant the effect of local environment. There is more evidence of earnings management for firms reconciling to US GAAP than for those preparing local accounts in accordance with US GAAP, but both show more evidence of earnings management than US firms.

Journal

Journal of Accounting and EconomicsElsevier

Published: Oct 1, 2006

References

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