Capital market consequences of cultural influences on earnings: The case of cross-listed firms in the U.S. stock market

Singgih Wijayana and Sidney J. Gray

International Review of Financial Analysis, 2018, vol. 57, issue C, 134-147

Abstract: We examine whether market reactions to earnings announcements vary according to differences in the cultural values of firms' countries of origin in the case of cross-listed firms in the U.S. stock market. To deal with time-varying volatility returns, market reactions are determined using the market model adjusted for GARCH. We also apply the Fama-French three factor model to determine market reactions. Using the dynamic panel generalized method of moments estimator, we analyze 5562 firm-year observations from 30 countries over the period 2000–2014. We find that market reactions to the earnings announcements of cross-listed firms are significantly negatively (positively) associated with firms’ home countries characterized by the culturally- based accounting values of conservatism (optimism) and secrecy (transparency). Overall, the results suggest that the informal institutional influences of culture relating to the financial performance of cross-listed firms are priced by the U.S. stock market.

Keywords: Market reactions; Information content of earnings; Cross-listed firms; Culture dimensions; Accounting values (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:57:y:2018:i:c:p:134-147

DOI: 10.1016/j.irfa.2018.03.007

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