Is cross-listing a panacea for improving earnings quality? The case of H- and B-share firms in China
(2022) International Review of Financial Analysis — Vol. 81, p. 102113 (2022)
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- Abstract
- This study examines whether cross-listed Chinese H- and B-share firms exhibit higher earnings quality relative to non-cross-listed A-share firms based on seven accounting- and market-based earnings quality attributes, including accrual quality, persistence, predictability, smoothness, conservatism, timeliness and value relevance. We find that earnings quality does not differ between cross-listed and non-cross listed firms in terms of accrual quality, timeliness and value relevance, and that H- and B-share firms report earnings with lower quality in terms of persistence and predictability. We also find that the B-firms report smoother earnings, while the H-firms report more conservative earnings. The results of a battery of cross-sectional, endogeneity and sensitivity analyses either confirm our primary findings of no earnings quality difference or reveal lower earnings quality for cross-listed firms than for non-cross-listed firms. Considering that cross-listing in China is primarily driven by government decisions, our findings suggest that, without proper incentives, cross-listing is not likely to be a panacea for higher quality financial reporting.
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Citations
Arslan-Ayaydin, Ö., Chen, S., Ni, S. X., & Thewissen, J. (2022). Is cross-listing a panacea for improving earnings quality? The case of H- and B-share firms in China. International Review of Financial Analysis, 81, 102113. https://doi.org/10.1016/j.irfa.2022.102113 (Original work published 2022)