Earnings management and stock price crashes post U.S. cross-delistings

Gilberto Loureiro and Sónia Silva

International Review of Financial Analysis, 2022, vol. 82, issue C

Abstract: We examine whether cross-delisted firms from the major U.S. stock exchanges experience an increase in crash risk associated with earnings management. Consistent with our prediction, we find that earnings management has a greater positive impact on stock price crash risk post cross-delisting when compared to a control group of firms that remain cross-listed. More importantly, we find that this effect is more pronounced for cross-delisted firms from countries with weaker investor protection, poorer quality of their information environment and less conservative accounting practices. Our findings are robust to the potential endogenous nature of the cross-delisting decision, alternative measures of stock price crash risk and information asymmetry. We interpret our results as evidence of a “reverse bonding effect” following cross-delistings from U.S. stock exchanges.

Keywords: Cross-delisting; Stock Price crash risk; Earnings management; Bonding hypothesis; Corporate governance; Investor protection; Information environment (search for similar items in EconPapers)
JEL-codes: F30 F31 G15 G30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001764

DOI: 10.1016/j.irfa.2022.102215

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