Earnings Management and Stock Price Crashes PostCrossdelisting

Gilberto Loureiro () and Sónia Silva ()
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Gilberto Loureiro: Universidade do Minho - NIPE, http://www.eeg.uminho.pt
Sónia Silva: Universidade do Minho, http://www.eeg.uminho.pt

No 16/2015, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We test 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 have a greater positive impact on stock price crash risk post-cross-delisting when compared to a sample of still cross-listed firms. Moreover, our results suggest that this effect is more pronounced for crossdelisted firms from countries with weaker investor protection and poorer quality of their information environment. We further examine whether managers’ ability to manipulate earnings increases post-cross-delisting around seasoned equity offerings. Our evidence shows that cross-delisted firms that engage in earnings management to inflate reported earnings prior to a seasoned equity offering are more likely to observe a subsequent stock price crash.

Keywords: Cross-Delisting; Earnings Management; Information Asymmetry; Seasoned Equity Offerings; Stock Price Crashes (search for similar items in EconPapers)
JEL-codes: F30 F31 G15 G30 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cfn
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