IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Economic consequences of adopting English for annual reports

  • Thomas Jeanjean

    ()

    (Accounting / Management Control Department - Essec Business School)

  • Hervé Stolowy

    ()

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - CNRS - GROUPE HEC)

  • Michael Erkens

    ()

    (Computation Institute [Chicago] - University of Chicago)

We investigate the economic consequences of increasing financial report visibility, measured by the use of English as a reporting language for firms from non-English-speaking countries. We sample 113 firms that started publishing their annual report in English (in addition to their local language) during 2004-2007 while not cross listing, not joining a major stock index or a stock index that requires external reporting in English and not engaging in major M&A activity. Taking into account the endogeneity of the reporting language, with a difference-in-differences setting and propensity score matching, and controlling for confounding factors, we find that adoption of English in the annual report is associated with lower information asymmetry, greater analyst following and more foreign investors. This suggests that language per se is an attribute of the firm's visibility.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://hal.archives-ouvertes.fr/hal-00690931/document
Download Restriction: no

Paper provided by HAL in its series Post-Print with number hal-00690931.

as
in new window

Length:
Date of creation: 21 May 2012
Date of revision:
Publication status: Published in Comptabilités et innovation, May 2012, Grenoble, France. pp.cd-rom, 2012
Handle: RePEc:hal:journl:hal-00690931
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00690931
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Altamuro, Jennifer & Beatty, Anne, 2010. "How does internal control regulation affect financial reporting?," Journal of Accounting and Economics, Elsevier, vol. 49(1-2), pages 58-74, February.
  2. Mark Grinblatt, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, 06.
  3. Cheng, Shijun & Xu, Xiaoyan, 2006. "The role of peer performance in managerial compensation surrounding the 1996 Telecommunications Act," Journal of Accounting and Public Policy, Elsevier, vol. 25(5), pages 596-608.
  4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  5. Stephan Siegel & Christian Lundblad & Campbell R. Harvey & Geert Bekaert, 2011. "The European Union, the Euro, and Equity Market Integration," 2011 Meeting Papers 468, Society for Economic Dynamics.
  6. Bae, Kee-Hong & Stulz, René M. & Tan, Hongping, 2008. "Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts," Journal of Financial Economics, Elsevier, vol. 88(3), pages 581-606, June.
  7. Kalok Chan & Vicentiu Covrig & Lilian Ng, 2005. "What Determines the Domestic Bias and Foreign Bias? Evidence from Mutual Fund Equity Allocations Worldwide," Journal of Finance, American Finance Association, vol. 60(3), pages 1495-1534, 06.
  8. R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
  9. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
  10. Andy C.W. Chui & Sheridan Titman & K.C. John Wei, 2010. "Individualism and Momentum around the World," Journal of Finance, American Finance Association, vol. 65(1), pages 361-392, 02.
  11. Bernard Raffournier, 1995. "The determinants of voluntary financial disclosure by Swiss listed companies," European Accounting Review, Taylor & Francis Journals, vol. 4(2), pages 261-280.
  12. Christopher S. Armstrong & John E. Core & Daniel J. Taylor & Robert E. Verrecchia, 2011. "When Does Information Asymmetry Affect the Cost of Capital?," Journal of Accounting Research, Wiley Blackwell, vol. 49(1), pages 1-40, 03.
  13. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, 05.
  14. Ramnath, Sundaresh & Rock, Steve & Shane, Philip, 2008. "The financial analyst forecasting literature: A taxonomy with suggestions for further research," International Journal of Forecasting, Elsevier, vol. 24(1), pages 34-75.
  15. Hervé Stolowy & Thomas Jeanjean & Cédric Lesage, 2008. "Why do you speak English (in your annual report)?," Working Papers hal-00578372, HAL.
  16. Vicentiu M. Covrig & Mark L. Defond & Mingyi Hung, 2007. "Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards," Journal of Accounting Research, Wiley Blackwell, vol. 45(1), pages 41-70, 03.
  17. Andrea Bonaccorsi, 1992. "On the Relationship Between Firm Size and Export Intensity," Journal of International Business Studies, Palgrave Macmillan, vol. 23(4), pages 605-635, December.
  18. Tomas Dvorak, 2001. "Do Domestic Investors Have an Information Advantage? Evidence from Indonesia," Center for Development Economics 168, Department of Economics, Williams College.
  19. Dahlquist, Magnus & Robertsson, Goran, 2001. "Direct foreign ownership, institutional investors, and firm characteristics," Journal of Financial Economics, Elsevier, vol. 59(3), pages 413-440, March.
  20. Diamond, Douglas W & Verrecchia, Robert E, 1991. " Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-59, September.
  21. Bekaert, Geert & Harvey, Campbell & Lundblad, Christian T, 2006. "Liquidity and Expected Returns: Lessons from Emerging Markets," CEPR Discussion Papers 5946, C.E.P.R. Discussion Papers.
  22. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  23. Lesmond, David A & Ogden, Joseph P & Trzcinka, Charles A, 1999. "A New Estimate of Transaction Costs," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1113-41.
  24. Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002. "The Geography of Equity Listing: Why Do Companies List Abroad?," Journal of Finance, American Finance Association, vol. 57(6), pages 2651-2694, December.
  25. Hau, Harald, 2001. "Geographic patterns of trading profitability in Xetra," European Economic Review, Elsevier, vol. 45(4-6), pages 757-769, May.
  26. Ruud Vergoossen, 1993. "The use and perceived importance of annual reports by investment analysts in the Netherlands," European Accounting Review, Taylor & Francis Journals, vol. 2(2), pages 219-244.
  27. Amir Sufi, 2007. "Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans," Journal of Finance, American Finance Association, vol. 62(2), pages 629-668, 04.
  28. Lucia S Chang & Kenneth S Most & Carlos W Brain, 1983. "The Utility of Annual Reports: An International Study," Journal of International Business Studies, Palgrave Macmillan, vol. 14(1), pages 63-84, March.
  29. John R. Graham & Campbell R. Harvey & Hai Huang, 2009. "Investor Competence, Trading Frequency, and Home Bias," Management Science, INFORMS, vol. 55(7), pages 1094-1106, July.
  30. Gonedes, Nicholas J, 1976. "The Capital Market, the Market for Information, and External Accounting," Journal of Finance, American Finance Association, vol. 31(2), pages 611-30, May.
  31. Arya, Anil & Mittendorf, Brian, 2007. "The interaction among disclosure, competition between firms, and analyst following," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 321-339, July.
  32. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  33. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  34. Baker, H. Kent & Nofsinger, John R. & Weaver, Daniel G., 2002. "International Cross-Listing and Visibility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(03), pages 495-521, September.
  35. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2008. "Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1085-1142, December.
  36. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  37. Stephen P. Baginski & John M. Hassell & Michael D. Kimbrough, 2004. "Why Do Managers Explain Their Earnings Forecasts?," Journal of Accounting Research, Wiley Blackwell, vol. 42(1), pages 1-29, 03.
  38. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
  39. Harald Hau, 2001. "Location Matters: An Examination of Trading Profits," Journal of Finance, American Finance Association, vol. 56(5), pages 1959-1983, October.
  40. Sergei Sarkissian, 2004. "The Overseas Listing Decision: New Evidence of Proximity Preference," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 769-809.
  41. Kalok Chan & Albert J. Menkveld & Zhishu Yang, 2008. "Information Asymmetry and Asset Prices: Evidence from the China Foreign Share Discount," Journal of Finance, American Finance Association, vol. 63(1), pages 159-196, 02.
  42. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  43. Jeffrey Hales & Xi (Jason) Kuang & Shankar Venkataraman, 2011. "Who Believes the Hype? An Experimental Examination of How Language Affects Investor Judgments," Journal of Accounting Research, Wiley Blackwell, vol. 49(1), pages 223-255, 03.
  44. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
  45. Ali, Ashiq & Chen, Tai-Yuan & Radhakrishnan, Suresh, 2007. "Corporate disclosures by family firms," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 238-286, September.
  46. Frédéric Sonney, 2009. "Financial Analysts' Performance: Sector Versus Country Specialization," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 2087-2131, May.
  47. Kalev, Petko S. & Nguyen, Anh H. & Oh, Natalie Y., 2008. "Foreign versus local investors: Who knows more? Who makes more?," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2376-2389, November.
  48. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00690931. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.