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Regulatory Cooperation, Enforcement, and Accounting Restatements of US‐Listed Foreign Firms

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  • Yuyuan Chang
  • Wen He

Abstract

Srinivasan et al. document evidence that foreign firms listed in the United States report fewer accounting restatements than US domestic firms. Using a regulatory change and a novel statistical method, we provide evidence suggesting that the evidence is driven by foreign firms systematically underreporting misstatements. Specifically, after their home countries join the Multilateral Memorandum of Understanding (MMoU) network that facilitates cross‐border regulatory enforcement, US‐listed foreign firms are less likely to commit misstatements but are more likely to report their misstatements. Furthermore, foreign firms’ restatements have a stronger association with measures of earnings management and receive less negative market reactions in the post‐MMoU period. The results suggest that stronger regulatory enforcement deters underreporting of restatements and makes foreign firms’ financial reporting more similar to that of US domestic firms.

Suggested Citation

  • Yuyuan Chang & Wen He, 2025. "Regulatory Cooperation, Enforcement, and Accounting Restatements of US‐Listed Foreign Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 52(4), pages 1735-1761, August.
    • Handle: RePEc:bla:jbfnac:v:52:y:2025:i:4:p:1735-1761
    DOI: 10.1111/jbfa.12866
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    References listed on IDEAS

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    Cited by:

    1. Jin, Qisen & Luo, Hongxia, 2025. "The tax squeeze and the books that bleed: Stress-induced restatements or strategic reshuffling?," Finance Research Letters, Elsevier, vol. 86(PE).

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