Discussion of How Representative Are Firms That Are Cross‐Listed in the United States? An Analysis of Accounting Quality

Abstract

Lang, Raedy, and Yetman (hereafter, LRY) document how firms crosslisted (CL) on U.S. exchanges differ systematically from a matched sample of firms not cross-listed (NCL) in the United States in terms of accounting quality.' Specifically, the authors find that post-cross-listing CL firms manage earnings less and recognize losses in a more timely fashion than do NCL firms. Earnings of CL firms also exhibit a stronger post-listing association with share price and return than do earnings of NCL firms. In additional analysis, LRY show the observed post-listing differences result partially from pre-listing differences in accounting quality and partially from changes around cross-listing. LRY further document that CL firms exhibit higher quality than firms trading on the U.S. over-the-counter (OTC) market or firms cross-listed on other non-U.S. exchanges, thereby confirming the unique implications of cross-listing in the United States on accounting quality. LRY conclude that their evidence shows CL firms exhibit higher accounting quality than do NCL firms, consistent with the notion that crosslisting in the United States presents CL firms with stringent SEC disclosure requirements and signals their commitment to higher quality reporting.