The market valuation of IAS versus US-GAAP accounting measures using Form 20-F reconciliations

We investigate the market valuation of earnings and book value amounts prepared under International Accounting Standards (IAS) and U.S.-GAAP to provide evidence on the debate between the U.S. SEC and the NYSE on whether foreign firms should be allowed to list in the U.S. using IAS. Our sample consists of foreign firms that adopted IAS in their primary accounts with a reconciliation to U.S.-GAAP in their Form 20-F filing. Using both price and return valuation models, we find evidence that the U.S.-GAAP earnings reconciliation adjustment is associated with market value and stock returns after controlling for IAS amounts. In addition, we find evidence that U.S.-GAAP amounts are valued differently than IAS amounts and are more highly associated with market values and security returns than IAS amounts.

[1]  Peter Easton,et al.  Discussion of revalued financial, tangible, and intangible assets: Association with share prices and non-market-based value estimates , 1998 .

[2]  Coopers Lybrand.  International accounting summaries : a guide for interpretation and comparison , 1991 .

[3]  A. Christie,et al.  On cross-sectional analysis in accounting research , 1987 .

[4]  P. Pope,et al.  A Comparison Of The Value-Relevance Of United-States Versus Non-United-States Gaap Accounting Measures Using Form-20-F Reconciliations - Discussion , 1993 .

[5]  Gary C. Biddle,et al.  Relative Versus Incremental Information Content , 1995 .

[6]  P. Elgers,et al.  The Market's Valuation of Nonreported Accounting Measures: Retrospective Reconciliations of Non-U.S. and U.S. GAAP , 1997 .

[7]  Gary C. Biddle,et al.  The Effects of Financial Disclosure Levels on Firms' Choices among Alternative Foreign Stock Exchange Listings , 1988 .

[8]  Hollis Ashbaugh.  Non-US firms' accounting standard choices in accessing foreign capital markets , 1997 .

[9]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[10]  J. Hanna,et al.  Capital Market Effects of U.S.-Canada GAAP Differences , 1994 .

[11]  Q. Vuong.  Likelihood Ratio Tests for Model Selection and Non-Nested Hypotheses , 1989 .

[12]  J. MacKinnon,et al.  Several Tests for Model Specication in the Pres-ence of Alternative Hypotheses , 1981 .

[13]  Mary E. Barth,et al.  The Effects of Cross‐Sectional Scale Differences on Regression Results in Empirical Accounting Research* , 1996 .

[14]  Maureen F. McNichols,et al.  Discretionary Disclosure and External Financing , 1995 .

[15]  Patricia M. Dechow.  Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals , 1994 .

[16]  H. White.  A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity , 1980 .

[17]  Kam C. Chan,et al.  The association between stock returns and foreign GAAP earnings versus earnings adjusted to U.S. GAAP , 1996 .

[18]  F. Edwards.  Listing of Foreign Securities on U.S. Exchanges , 1993 .

[19]  P. Pope,et al.  International differences in GAAP and the pricing of earnings , 1992 .

[20]  E. Amir,et al.  A Comparison Of The Value-Relevance Of United-States Versus Non-United-States Gaap Accounting Measures Using Form-20-F Reconciliations , 1993 .

[21]  Christine Botosan,et al.  Regulation, Disclosure and Market Liquidity (An Examination of Foreign Issuers in Regulated Versus Less-Regulated US Equity Markets) , 1997 .

[22]  Russell J. Lundholm,et al.  CROSS- SECTIONAL DETERMINANTS OF ANALYST RATINGS OF CORPORATE DISCLOSURES , 1993 .

[23]  Mary E. Barth,et al.  International Accounting Differences and their Relation to Share Prices: Evidence from U.K., Australian, and Canadian Firms , 1996 .

[24]  S. P. Kothari,et al.  Price and return models , 1995 .

[25]  David A. Belsley,et al.  Regression Analysis and its Application: A Data-Oriented Approach.@@@Applied Linear Regression.@@@Regression Diagnostics: Identifying Influential Data and Sources of Collinearity , 1981 .

[26]  S. Saudagaran.  An Empirical Study of Selected Factors Influencing the Decision to List on Foreign Stock Exchanges , 1988 .

[27]  Carrie Bloomer.  The Iasc-U. S. Comparison Project: A Report on the Similarities and Differences Between Iasc Standards and U. S. Gaap , 1997 .

[28]  Mark H. Lang,et al.  Corporate Disclosure Policy and Analyst Behavior , 1998 .

[29]  T. Harris.  International accounting standards versus US-GAAP reporting : empirical evidence based on case studies , 1995 .