Albert Tsang

The Effect of Mandatory IFRS Adoption on International Cross-Listings

Using comprehensive international cross-listing data collected from 34 (50) home (target) countries, we examine whether mandatory IFRS adoption facilitates firms’ cross-listing activities. Our results show that following mandatory IFRS adoption, firms exhibit significantly higher cross-listing propensity and tend to cross-list their securities in more countries. We also find that cross-listing firms from countries with mandatory IFRS adoption are more likely to cross-list their securities in IFRS-adopting countries and countries with larger and more liquid capital markets following IFRS adoption. Further corroborating our results, we find that IFRS adoption has a greater impact on mandatory IFRS adopters from countries with larger accounting changes, lower disclosure requirement and less access to external capital prior to the IFRS adoption. Collectively, our findings are consistent with the notion that mandatory IFRS adoption facilitates firms’ cross-listing activities and highlight the importance to consider the change in firms’ crosslisting incentives in examining the capital market consequences of mandatory IFRS adoption.

Foreign Institutional Investors and Voluntary Disclosure around the World

We examine the impact of foreign institutional investors on firms’ voluntary disclosure practices in the form of management forecasts. In a large sample of firm-year observations from 32 non-U.S. countries, we find that foreign institutional investors significantly increase the likelihood, frequency, and informativeness of firms’ management forecasts and their effects are more important than those of domestic institutional investors. These findings are largely driven by foreign institutional investors originated from countries with stronger corporate governance than the firm’s home country. In addition, we find that foreign institutional ownership is associated with management forecasts that are more specific and more disaggregated. Overall, our results suggest that cross-border institutional investments serve as an important channel in fostering better corporate disclosures practices and improving the information environment of firms around the world.

Discussion: the impact of market segmentation on the value-relevance of accounting information: evidence from China

Value relevance research, which investigates the usefulness of accounting information to stock investors, has received considerable international attention. Following this line of research, Wu et al. (2012) address the question of whether and how the change in the information environment resulting from the relaxation of China’s market segmentation policy (MSP) in 2001 has affected the value relevance of accounting information in China. The relaxation of the MSP removed the restriction on Chinese domestic investors (who were allowed to trade A-shares issued by Chinese listed firms only) trading of B-shares. Using a sample of Chinese listed companies that issue both Aand B-shares, and comparing the R-square of the regressed share price or return on earnings and book value of equity during the preand post-MSP periods, Wu et al. (2012) find that (a) there is a significant improvement in the value relevance of accounting information following the relaxation of the MSP for firms issuing both types of shares and (b) the improvement in value relevance is bigger for B-shares than for A-shares. The authors interpret their findings as being consistent with the increased information transmission between A-share investors, who are better informed domestic investors, and B-share investors, who are less informed foreign investors.