International evidence on the impact of adopting English as an external reporting language

Thomas Jeanjean, Hervé Stolowy (), Michael Erkens and Teri Lombardi Yohn
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Michael Erkens: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Teri Lombardi Yohn: Kelley School of Business - Indiana University [Bloomington] - Indiana University System

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Abstract: This study investigates the economic consequences of non-English-speaking companies adopting English as an external reporting language. We examine a sample of European companies that initiate the voluntary issuance of an annual report in English in addition to the local language annual report. To control for self-selection, we use a difference-in-differences design with a propensity score matched control sample. We find that adoption of English as an external reporting language is associated with increased foreign ownership, decreased information asymmetry, and increased analyst following. We also find that these benefits are not conditional on the use of IFRS for financial reporting. Our findings hold if we run a number of robustness checks to control for correlated events (creation of an investor relations service, provision of conference calls, and/or changes in management). These results are consistent with the language used in the annual report acting as a barrier to investment for some investors and with annual reports issued in English reducing investors' information processing costs.

Keywords: English; language; annual report; foreign ownership; information asymmetry; analyst following (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

Published in Journal of International Business Studies, 2015, 46 (4), pp.180-205. ⟨10.1057/jibs.2014.33⟩

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Journal Article: International evidence on the impact of adopting English as an external reporting language (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01147676

DOI: 10.1057/jibs.2014.33

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