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We analyze the disclosure practices of companies as a function of their interaction with the U.S. markets for a group of 794 firms from 24 countries in Asia-Pacific and Europe. Our analysis uses the Transparency and Disclosure scores developed recently by Standard amp; Poor's. These scores rate the disclosure of companies from around the world using U.S. disclosure practices as an implicit benchmark. Results show a positive association between these disclosure scores and a variety of market interaction measures, including US Listing, US investment flows, export to and operations in the US. Trade with US, however, has an insignificant relationship with the disclosure scores. Our empirical analysis controls for the previously documented association between disclosure and firm size, performance, and country legal origin. Our results are broadly consistent with the hypothesis that cross-border economic interactions are associated with similarities in disclosure and governance practices.
We analyze the association between corporate transparency and interaction with the US markets for a group of 466 firms from 13 Asia-Pacific countries. Our analysis uses newly developed Transparency and Disclosure scores by Standard & Poor's. Results show a positive association between corporate transparency and the following types of market interactions: business operations in the US, US listing, and international equity ownership, US equity or direct investment in the company's home country, and business travel from the home country to the US. There is mixed evidence that a company's exports to the US, and the company's country's trade with the US, are negatively associated with the level of its disclosure. Our empirical analysis controls for the previously documented association between disclosure and firm size, performance, and country legal origin. The documented association between market interactions and disclosure contributes to the on going debate on the impact of globalization on governance practices.
This is one of the first large-scale studies to examine the voluntary disclosure practices of foreign firms cross-listed in the United States. We proxy for voluntary disclosure using three attributes of firms' management earnings guidance: (1) the likelihood of issuance; (2) the frequency of earnings guidance; and (3) a guidance quality measure. After first establishing that market participants view these firms' disclosures as credible and economically important (i.e., the disclosures are negatively related to analyst forecast errors and the implied cost of equity capital), we compare cross-listed firms' disclosure practices with comparable U.S. firms and explore variations in disclosure practices among cross-listed firms. We find that cross-listed firms issue less frequent and lower quality management earnings guidance than comparable U.S. firms. We further show that the gap between U.S. and cross-listed firms widened after passage of Regulation FD, a regulation which induced greater public disclosure of firm-specific information. Focusing on the sample of cross-listing firms, we show that firms from common-law countries disclose more than firms from code-law countries. Finally, our results indicate that cross-listed firms that do not list on an organized U.S. exchange provide more frequent and higher quality disclosure than those that do list on organized exchanges.
This study examines the global disclosure practices of U.S. companies that list equities in overseas markets. We focus on two questions: First how (if at all) do the frequency mix and timing of a firm's disclosures change in an overseas market when the firm lists equity in that market? Second after a U.S. firm has listed overseas are its disclosures in the overseas market as frequent and as timely as in the U.S.? We observe that U.S. firms listing in the U.K. and in Continental Europe do not increase the frequency of timeliness of accounting disclosures they make in Europe during the post-listing period. In contrast the private U.S. firms making initial public offerings in the U.K. and U.S. firms listing existing equity in Japan do increase disclosure frequency and timeliness. We also find that U.S. firms make fewer and less timely accounting disclosures in non-U.S. markets than in the U.S. during the post-listing period. These results suggest that since acquiring and maintaining an equity listing in the U.K. and Continental Europe is inexpensive and monitoring and enforcement of disclosure rules is not stringent U.S. firms might list in those markets even when they have little serious intention of expanding their shareholder bases or complying with the disclosure rules there. In contrast since listing equity in Japan is comparatively expensive perhaps the only firms that list in Japan are those that believe they can benefit significantly from the foreign listing and this may influence their disclosure choices.
The number of foreign companies accessing the United States (U.S.) public securities markets has increased dramatically over the last ten years. Since 1997, over 600 foreign companies have registered securities with the Securities and Exchange Commission (SEC) for the first time. As of December 31, 2004, more than 1200 companies from 57 countries were filing periodic reports with the SEC. Securities regulation for these companies has always been a matter of debate and a stream of research has examined the disclosure practices of foreign companies listed in the U.S. However, none of those studies have looked at the voluntary disclosure practices of U.S.-listed Asian companied in the U.S. There have been some studies which have examined the disclosure practices of companies in the individual Asian countries, but none of them have comprehensively investigated the disclosure practices of all U.S.-listed Asian companies. The study at hand contributes to the international accounting literature by specifically examining the voluntary disclosures provided by U.S.-listed Asian companies in the U.S. This study examined three research objectives. (1) The first research objective of this study was to test the Einhorn (2005) theory on U.S.-listed Asian companies. This theory indicates that the voluntary disclosures (measured by Botosan, 1997) of companies will be positively related to the strictness of their mandatory disclosure environment (measured by a survey of experts). (2) Secondly, the study examined the extent to which voluntary disclosures provided by U.S.-listed Asian companies in the U.S. are convergent, and determined the effect of culture on those disclosures [Warner (2003), Gray (1988) and Zarzeski (1996)]. (3) Lastly, the current research investigated the voluntary use of "international" standards instead of national standards by U.S.-listed Asian companies in preparation of their consolidated financial statements. This aspect of the study has extended the evidence in Tarca (2004). Results of this study provide perhaps the first empirical evidence on the voluntary disclosures provided by U.S.-listed Asian companies in the U.S.A total of seven hypotheses were developed and statistically tested to accomplish the research objectives. The evidence produced in this study indicates that U.S.-listed Asian companies (from countries which have a stricter mandatory disclosure regime in their home country) provided significantly fewer voluntary disclosures than the U.S.-listed Asian companies (from countries which have a less strict mandatory disclosure regime). This finding is contrary to the theory developed in Einhorn, 2005. In addition, this study has documented that over 80 percent of the U.S.-listed Asian companies are voluntarily using "international" standards in preparation of their financial statements and thus contributing towards International accounting convergence. However, their choice to use "international" standards is not affected by their proportion of foreign sales or their size. An important contribution of this study is the development of a measure for strictness of mandatory disclosure regimes of Asian countries by two alternative methods by expert rankings and by using the results of Adhikari and Tondkar (1992). The results of this study complement Cahan et al. (2005) who examine the effect of global operations and global financing on voluntary disclosures of companies from the Fortune 500 list. They report a significant association between globalized operations and voluntary disclosures of companies. However, their study does not include the strictness of mandatory disclosure regime which, according to Einhorn (2005) is a significant determinant of voluntary disclosures. The results of the current research regarding culture variables, however, are not completely consistent with Zarzeski (1996). Zarzeski shows that domestic culture is an important determinant for voluntary disclosures. However, the current research results remain inconclusive in this aspect. This study does not find strong evidence of a relation between domestic culture and the voluntary disclosures provided by U.S.-listed Asian companies in the U.S. Nonetheless, there appears to be clear consensus from this dissertation that provides evidence to reject the Einhorn (2005) theory and the results also provide support for the argument that U.S.-listed Asian companies are contributing towards International accounting convergence
U.S. investors unknowingly may invest in companies with business operations in countries the U.S. Department of State designates as State Sponsors of Terrorism (SSTs), currently Cuba, Iran, Sudan and Syria. In most circumstances, U.S. companies are prohibited from doing business in SSTs. However, such U.S. sanctions generally do not apply directly either to foreign companies or to foreign subsidiaries of U.S. companies. If a company is organized under the laws of a foreign jurisdiction that does not sanction an SST, then that company may conduct business in the SST. That company, or its parent, may also raise capital in U.S. markets. A well functioning disclosure regime could both reduce opportunities for regulatory arbitrage and strengthen U.S. efforts to isolate SSTs through economic sanctions. Although the Securities and Exchange Commission (SEC) lacks authority to prevent foreign companies from doing business in SSTs, the SEC may require such companies to disclose their business if they offer securities in U.S. public markets. Whether business activities must be disclosed often depends on whether the information is “material”. Courts have approached the question of whether a particular business activity is “material” by asking whether there is a substantial likelihood that a reasonable investor would find the information significant. Business in or with an SST would likely be significant to a reasonable investor, i.e. it would be material and therefore should be disclosed by the company. As an empirical matter, however, disclosure of operations in or with SSTs has been limited. Review of company filings indicates that many companies are not disclosing their operations in or with SSTs. Even when companies disclose the existence of such operations, substantive information about the nature and extent of operations is often withheld. In correspondence between non-disclosing companies and the SEC, companies often argue that their operations are not material because they represent a small percentage of overall revenue. This approach to materiality is both reductive and inconsistent with Supreme Court articulations of the standard. As a result of the narrow interpretation of materiality used by many reporting companies, their disclosure may be inadequate and their conduct may not be disciplined by public scrutiny. U.S. investors unwittingly may support activities that are contrary to U.S. security policy, and that would be illegal for the investor, as a U.S. person, to undertake directly.
Corporate law and corporate governance have been at the forefront of regulatory activities across the world for several decades now, and are subject to increasing public attention following the Global Financial Crisis of 2008. The Oxford Handbook of Corporate Law and Governance provides the global framework necessary to understand the aims and methods of legal research in this field. Written by leading scholars from around the world, the Handbook contains a rich variety of chapters that provide a comparative and functional overview of corporate governance. It opens with the central theoretical approaches and methodologies in corporate law scholarship in Part I, before examining core substantive topics in corporate law, including shareholder rights, takeovers and restructuring, and minority rights in Part II. Part III focuses on new challenges in the field, including conflicts between Western and Asian corporate governance environments, the rise of foreign ownership, and emerging markets. Enforcement issues are covered in Part IV, and Part V takes a broader approach, examining those areas of law and finance that are interwoven with corporate governance, including insolvency, taxation, and securities law as well as financial regulation. The Handbook is a comprehensive, interdisciplinary resource placing corporate law and governance in its wider context, and is essential reading for scholars, practitioners, and policymakers in the field.
For this volume we have collected 12 original research papers dealing with various issues relating to transparency. This topic spans many disciplines beyond accounting and finance, intersecting economics, law and management, embracing sociology and political science, and offering opportunities for creative interdisciplinary research. We hope this v