Accounting Quality, Earnings Management and Cross-listings: Evidence from China
Abstract
This paper examines the quality of financial reporting of Chinese firms cross-listed in the United States, Hong Kong and noncross-listed Chinese firms. We examine quality of financial reporting based on measures of earnings management, timely loss recognition and price-earnings association. We find that both cross-listings and noncross-listings show significant earnings smoothing and use accruals to manage earnings, and are not timely in loss recognition. We surmise that cross-listing in the United States or Hong Kong has not changed the accounting choices of Chinese cross-listing firms. However, our findings show that the market considers earnings and book value data of cross-listing firms to be more informative than those of noncross-listing firms in the event of good news. Our contribution is to show that in contrast to previous literature, firms from China do not have better reporting quality when they cross-list in the United States. There are still significant accounting deficiencies in many Chinese firms cross-listed in the United States (Financial Times, 2011). © 2012 World Scientific Publishing Co. and Center for Pacific Basin Business, Economics and Finance Research.
Recommended Citation
Eng, L., & Lin, Y. C. (2012). Accounting Quality, Earnings Management and Cross-listings: Evidence from China. Review of Pacific Basin Financial Markets and Policies, 15(2) World Scientific Publishing.
The definitive version is available at https://doi.org/10.1142/S0219091512500099
Department(s)
Business and Information Technology
Keywords and Phrases
accounting quality; China; Cross-listings; earnings management; earnings smoothing
International Standard Serial Number (ISSN)
0219-0915
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2024 World Scientific Publishing, All rights reserved.
Publication Date
01 Jun 2012
