The Price of Being Foreign: Stock Market Penalties Associated with Accounting Irregularities for US-Listed Foreign Firms

• 成果类型: Article
• 署名作者: Ge, Weili; Matsumoto, Dawn; Wang, Emily Jing; Zhang, Jenny Li
• 署名单位: University of Washington; University of Washington Seattle; Hong Kong University of Science & Technology; University of British Columbia
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12530
• 发表日期: 2020
• 页码: 1073-1106
• 关键词: investor protection; information-content; cross-listings; earnings; cost; RESTATEMENTS; disclosure; QUALITY; CONSEQUENCES; management

摘要

We examine the stock market consequences of disclosing accounting irregularities for U.S.-listed foreign firms. After controlling for the severity of the irregularity and other firm characteristics, we find that foreign firms experience significantly more negative short-window stock market reactions following irregularity announcements than do U.S. firms. Moreover, for a subsample of 64 irregularities of foreign firms that are listed on both a U.S. and home country stock exchange, we find evidence that restating firms' U.S. investors react more negatively to the same irregularity than their home country investors. This differential market reaction appears related to firm-specific information risks that are greater for foreign firms than U.S. firms. Collectively, consistent with the reputational bonding hypothesis in prior literature, our results suggest that accounting irregularities cause U.S. investors to reassess the information risk associated with foreign firms.