How Representative are Firms that are Cross Listed in the United States? An Analysis of Accounting Quality

We provide evidence on the characteristics of local-GAAP earnings for firms cross listing on US exchanges relative to a matched sample of foreign firms currently not cross listing in the US to investigate whether US listing is associated with differences in accounting data reported in local markets. We find that cross-listed firms differ in terms of the time series properties of earnings and accruals, and the degree of association between accounting data and share prices. Cross-listed firms appear to be less aggressive in terms of earnings management, and report accounting data that are more conservative, take account of bad news in a timelier manner, and are more strongly associated with share price. Further, the differences appear to result partially from changes around cross listing and partially from differences in accounting quality prior to listing. We do not observe a similar pattern for firms cross listed on other non-US exchanges or on the US Over-the-Counter market, suggesting a unique quality to cross listing on US exchanges