Jonathan E. Duchac

Differential Levels of Disclosure and the Earnings-Return Association: Evidence from Foreign Registrants in the United States

Foreign companies listing on U.S. exchanges are required to report financial information under U.S. GAAP on Form 20-F using either Item 17 or Item 18 disclosure rules. These two disclosure rules differ in that Item 17 allows many exemptions from U.S. GAAP, while Item 18 requires disclosure of all financial information in accordance with U.S. GAAP. This study examines the differential earnings-return association between Item 17 and Item 18 filers. We find significantly higher earnings-return associations for Item 18 filers than for Item 17 filers. While the earnings-return association of Item 18 foreign firms is not different from that of matched U.S. firms (which fundamentally use Item 18 rules), the earnings-return association of Item 17 foreign firms is significantly lower than that of matched U.S. firms. Overall, the results are consistent with the idea that higher levels of disclosure may be related to lower discount rates and higher earnings response coefficients.

Response to Discussion on 'Differential Levels of Disclosure and the Earnings-Return Association: Evidence from Foreign Registrants in the United States'

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The Strange World of Strategic Internet Alliances

How can your company successfully develop an Internet strategy—and incorporate it into the firms existing structure? An Internet alliance can be part of the answer. But it may involve some unusual arrangements. ©2000 John Wiley & Sons, Inc.