| Summary: | 博士 === 國立臺北大學 === 會計學系 === 93 === Accessing U.S. capital markets via ADRs has gained the popularity of non-U.S. firms around the world over the past decades. The purpose of this dissertation is to investigate how the earnings quality of cross-listed firms is affected by the stricter U.S. legal environment around cross-listing. Subject to the stricter U.S. legal regulations and environment, especially those on investor protection, the incentives of these non-U.S. managers are reshaped to limit their expropriation on investors, and this can be used to attract wider range of investors. In addition, the reshaped incentives also mitigate the need of manager to manage earnings, which in turn improve earnings quality of cross-listed firms. Furthermore, the magnitude of improvement in earnings quality a firm can achieve is expected to relate to the bonding power of U.S. legal environment on the firm, which is negatively related to the investor protection of the home country.
The concept of earnings quality is constructed by earnings management, timely recognition of loss, and associations between market and accounting data. Due to the narrow numbers of companies and short years of historical data deriving form database, the empirical results only partially support that non-U.S. firms improve their earnings quality after cross-listing on U.S. securities markets, such as AMEX, NYSE, and NASDAQ. In addition, the results do not support that the magnitude of improvement is negatively related to the level of investor protection, measured with legal traditions and country clusters, in the home country.
The results of this dissertation partially support the view that the legal system of a country is a crucial factor to its corporate governance. The stronger the protection provided by the legal system on minority shareholders, the less the expropriation from the controlling managers will be. By means of establishing ADR programs, firms from countries with weaker legal system can borrow the stringent legal system from the U.S., which can partially improve their weak protection on investor, which in turn enhance the quality of financial reporting.
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