2024-11-08
10:00 AM - 11:00 AM
BS574
Cross-Border Investments in Private Firms: The Benefits of Comparability for Foreign Investors
Organised by RCE 5
Abstract:
We examine whether and how more comparable financial information affects equity investors identification of and investments in private firms. Exploiting a large-sample quasi-experimental setting, we document that firms affected by a major accounting reform experienced a greater increase of 2-6% in foreign ownership than firms that were not affected after the reform compared to before. Cross-sectional results confirm that the effect is stronger for smaller, highly profitable, intangible-intensive, and more stable firms. Additional analyses suggest that shareholders with private information channels benefit less from the increased comparability in public information, while those with greater familiarity with the new standards benefit more. The findings are robust to different forms of matching procedures and a placebo-test. Our large sample evidence based on the historical shareholder information of private firms provides insights on the economic effects of increasing the comparability of local GAAP for foreign-direct investments in private firms. Additionally, our findings are relevant to standard setters as more countries continue their convergence towards and endorsement of International Financial Reporting Standards and update and improve their local GAAP.
Event introduction:
1. Accounting Education Implications:
The paper investigates the impact of accounting comparability on foreign investment decisions. This has implications for accounting education, as it underscores the importance of teaching students about the real-world consequences of accounting standards and their role in facilitating cross-border capital flows.
2. Curriculum Development:
The research findings can inform curriculum development in accounting programs. By highlighting the significance of comparability in financial reporting, educators can design courses that equip students with the skills to analyze and interpret financial information in a global context.
3. fostering accounting education research, promoting pedagogical innovation, and providing valuable learning opportunities for faculty and students.
Presenter: Prof. Kristian D. Allee, University of Arkansas
Kris is a professor and the Doyle Z. Williams Chair in Professional Accounting in the Sam M. Walton College of Business at the University of Arkansas. He graduated from Indiana University with a PhD in Accounting. Before that, he attended BYU for his BS and MAcc degrees. He worked at Michigan State University and the University of Wisconsin - Madison. He was also an associate economist for the Federal Reserve Banks in St. Louis, MO.
Kris' research examines firms' disclosure policies, textual analysis and computational linguistics on firm disclosures, the production and use of financial statements by small businesses, cost of equity capital estimates, and corporate tax policies and behavior. He has published research in The Accounting Review, Journal of Accounting Research, Journal of Accounting and Economics, Contemporary Accounting Research, Review of Accounting Studies, Accounting Organizations and Society, Management Science, the Journal of Financial Reporting, the Journal of Management Accounting Research, Accounting Horizons, Economics Letters, Business Horizons, Issues in Accounting Education, and the Journal on Baseball and American Culture.