skip to main content
Language:
Search Limited to: Search Limited to: Resource type Show Results with: Show Results with: Search type Index

Segment earnings and managerial incentives: evidence from foreign firms cross-listed in the USA

Review of accounting & finance, 2022-06, Vol.21 (3), p.130-153 [Peer Reviewed Journal]

Emerald Publishing Limited ;Emerald Publishing Limited. ;ISSN: 1475-7702 ;EISSN: 1758-7700 ;DOI: 10.1108/RAF-10-2020-0305

Full text available

Citations Cited by
  • Title:
    Segment earnings and managerial incentives: evidence from foreign firms cross-listed in the USA
  • Author: Sang, Fangjun ; Alam, Pervaiz ; Hinkel, Timothy
  • Subjects: Accounting ; Capital markets ; Costs ; Earnings ; Earnings management ; Financial reporting ; Incentives ; International finance ; Investments ; Proprietary
  • Is Part Of: Review of accounting & finance, 2022-06, Vol.21 (3), p.130-153
  • Description: Purpose Prior studies find that US firms with managerial incentives may manipulate the earnings gap to obscure higher performing segments to competitors or to hide underperforming segments from external monitors. The purpose of this study is to complement extant research by examining the association between managerial incentives and segment earnings reporting of cross-listed firms in the USA and the impact of country-level characteristics on this association. Design/methodology/approach The dependent variable is the earnings gap between firm-level earnings and sum of segment-level earnings. Managerial incentives are proxied by proprietary cost and agency cost. Proprietary cost is measured by the Herfindahl index. Agency cost is measured by inefficient resource transfer activities across segments. Foreign firms in this study are companies listed on major US Stock Exchanges with headquarters outside the USA. Comparable US firms are selected using the Propensity Score Matching procedure as a control group. Findings The authors find that 1) proprietary cost motive is not the determinant of earnings gap reporting for cross-listed firms; 2) cross-listed firms motivated by agency costs are more likely to manipulate segment earnings reporting than US firms; and 3) among cross-listed firms motivated by agency costs, firms in weak rule of law countries demonstrate more manipulation in segment earnings than firms in strong rule of law countries. Originality/value Extant research with regard to segment reporting exclusively focuses on US firms, and little is known about the practice of segment reporting by cross-listed firms originating from different legal regimes. This study fills the gap in the literature by comparing cross-listed firms to US firms in the reporting of segment earnings. The results of this study have implications for regulators and investors who are interested in evaluating the extent of cross-listed firms’ financial reporting quality.
  • Publisher: Patrington: Emerald Publishing Limited
  • Language: English
  • Identifier: ISSN: 1475-7702
    EISSN: 1758-7700
    DOI: 10.1108/RAF-10-2020-0305
  • Source: ProQuest Central
Back to results list
Go to Previous pagePrevious Result  6 NextGo to Next page
INSPIRE LIBRARY - TON DUC THANG UNIVERSITY (84-028) 37 755 057 Feedback
19 Nguyen Huu Tho St. Dist.7, HCM thuvien@tdtu.edu.vn

Copyright © 2017 INSPIRE LIBRARY - TON DUC THANG UNIVERSITY

Searching Remote Databases, Please Wait