Discussion of ADRs, Analysts, and Accuracy: Does Cross-Listing in the United States Improve a Firm's Information Environment and Increase Market Value?

Christian Leuz

Journal of Accounting Research, 2003, vol. 41, issue 2, pages 347-362

Abstract: Lang, Lins, and Miller [2002] investigate the relation between cross-listing in the United States and information intermediation by analysts. The results suggest that cross-listing in the United States increases analyst following and forecast accuracy and that both variables are associated with Tobin's "Q". These findings are interesting and advance the cross-listing literature in several ways. This discussion raises two issues. First, I highlight that the sources of cross-listing effects are not obvious and are difficult to disentangle. To illustrate this point, I replicate the analysis using cross-listed Canadian firms, for which mandated disclosures are held constant. Thus, if disclosure effects are important for documented cross-listing effects, I expect to find no relation in the Canadian sample. The findings for forecast accuracy are consistent with this hypothesis. However, analyst following continues to be significantly higher for cross-listed Canadian firms. These findings suggest that the sources of cross-listing effects differ for analyst coverage and forecast accuracy. Second, I discuss the link between analyst variables, firm value, and cost of capital. As they are only tenuously related, I draw attention to some unresolved questions and areas for future research. Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2003.

Date: 2003
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