The Consequences of the Elimination of 20-F Reconciliation Requirement: A Review of the Literature

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This paper reviews the literature of 20-F reconciliation requirement for cross listed firms in the US. Specifically, the review is divided into two parts – one involving the literature until the elimination of the reconciliation requirement and the other involving the literature documenting the effects of the elimination of the reconciliation requirement. In so doing, we developed framework that helped to document the effects of 20-F reconciliation before and after its elimination. The analysis from the review of the literature before the elimination of 20-F reconciliation suggests that over the time the research evolved. Since 20-F reconciliation requirement was very much controversial when required during the 1980s, the early stages of research focused on the usefulness/utility of it; however, over time it helped to analyze the differences between US GAAP and national GAAP. Additionally, the reconciliation requirement also helped to assess the harmonization process over a large period of time, especially the harmonization process of IASB and FASB convergence projects, thus evaluating the effectiveness of harmonization efforts in practice. Next, the analysis from the review of the literature after the elimination of the 20-F reconciliation requirement suggests that market did not miss the nonexistence of reconciliation requirement overall in terms of information quality and information informativeness. Moreover, the review suggests that 20-F reconciliation requirement has far reaching effects beyond the market - cost of debt, time saving, audit pricing and so on. Though, on average, the elimination benefited companies by either reducing different kinds of costs or not affecting information environment, these effects, in many cases, are not uniform, e.g., companies from low enforcement regimes or weaker investor protection countries did not experience such benefits.