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Does accounting choice influence US investment in non‐US companies? Evidence from US institutional investment in Australian companies

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  • Shrutika Chugh
  • Neil Fargher

Abstract

Previous research asserts that companies that choose accounting methods more familiar to investors reduce information asymmetry and increase credibility of their financial statements to those investors, thereby attracting higher levels of foreign investment. This study examines the variation in accounting policies associated with institutional investment in Australian equity. The results suggest that large US institutional holdings in Australian companies are associated with American Depositary Receipt listing and, incrementally, choice of accounting methods that conform to US Generally Accepted Accounting Principles (GAAP). Although making accounting choices in compliance with US GAAP is significantly associated with higher levels of institutional ownership in a statistical sense, examination of the specific differences in accounting choices suggests that the differences in informational content are relatively minor.

Suggested Citation

  • Shrutika Chugh & Neil Fargher, 2008. "Does accounting choice influence US investment in non‐US companies? Evidence from US institutional investment in Australian companies," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(1), pages 99-121, March.
    • Handle: RePEc:bla:acctfi:v:48:y:2008:i:1:p:99-121
    DOI: 10.1111/j.1467-629X.2007.00232.x
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    Cited by:

    1. Mishra, Anil V., 2013. "Foreign ownership in Australian firms," Research in International Business and Finance, Elsevier, vol. 28(C), pages 1-18.
    2. Kam‐Wah Lai & Gopal V. Krishnan, 2009. "Are non‐audit services associated with firm value? Evidence from financial information system‐related services," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(3), pages 599-617, September.

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