We compare earnings conservatism of UK companies cross-listed in the US to that of UK companies without a US-listing. We expect that conservatism will be more pronounced for cross-listed firms than for firms with a UK listing only, because the cross-listed firms face a stricter enforcement regime. Furthermore, cross-listed firms may use a listing on a US exchange to signal high-quality reporting to investors. Using a matched-pairs research design, we find that earnings of UK cross-listed firms are significantly more conservative than earnings of UK firms without a US listing. Moreover, cross listed firms display particularly high levels of conservatism during the early years of their cross-listing. This indicates that firms use earnings conservatism to commit to highly demanding reporting requirements and in doing so communicate a perception of investor care. Copyright Blackwell Publishers Ltd, 2005.

This paper investigates the effect of product market characteristics on the decision to go public. When firms decide to go public or remain private, they trade off product market related costs and benefits. Costs arise from the loss of confidential information to competitors, e.g., in the IPO prospectus and subsequent mandated public disclosures, while benefits emerge from raising capital allowing the firm to strengthen its position in the product market. Our results show that UK firms are more likely to go public when they operate in a more profitable industry and in an industry with lower barriers to entry. These firms are more likely to go public in order to improve their position in the product market and to deter new entrants into the industry. However, firms from more competitive industries and firms with smaller market share are less likely to go public. For these firms the loss of confidential information to rivals outweighs the benefits of going public.

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This paper examines whether the ‘style’ of individual auditors influences financial reporting quality in Germany. Audit quality in Germany should be uniformly high, because of strong reputational needs, strict controls on operating procedures, and quality enforcement mechanisms. An audit partner's style should not affect this quality level. However, our results do not support this expectation. Exploiting a unique dataset comprising the names of the audit engagement and review partners of listed German companies, we find that audit engagement partners in Germany have a significant influence on audit quality, beyond firm‐ and office‐level factors. In contrast, audit review partners do not have a consistent significant influence on audit quality. We measure audit quality by the level of a firm's abnormal accruals and its propensity to meet or beat an earnings target. We also find that the 2005 adoption of a new audit quality enforcement system that includes ‘naming and shaming’ does not reduce the influence of audit partner style on financial reporting quality.

In this study we investigate earnings conservatism of cross-listed and domestically listed companies. We expect that conservatism will be more pronounced for cross-listed companies because they face the threat of litigation from a wider audience of shareholders than companies with a domestic listing only. Specifically, we compare conservatism of Dutch firms with a listing in the US to conservatism of Dutch firms without a US listing. The motivation to investigate this specific setting is that the liability exposure of managers and auditors in the US market is considered as far more burdensome than in the Dutch market.Another interesting issue is that firms with a cross-listing in the US have to comply with different reporting standards; in our case Dutch GAAP and US GAAP. Therefore we not only compare conservatism of Dutch GAAP earnings of cross-listed companies versus that of domestically listed companies, but also conservatism of US GAAP earnings versus their Dutch GAAP counterparts. It is difficult to predict the outcomes of the latter question. One the one hand, if company managers view US GAAP earnings as especially important for US shareholders and Dutch GAAP earnings as especially relevant for Dutch shareholders they may try to apply conservatism accordingly. On the other hand, it can be argued that cross-listed companies cater to their US investors by presenting more conservative Dutch GAAP earnings numbers, so that it is not necessary to make US GAAP earnings incrementally conservative.Empirical findings for the period from 1993 to 2000 show that Dutch GAAP earnings of cross-listed firms are significantly more conservative than earnings reported by firms with a domestic listing only. Maybe surprizing is the outcome that US GAAP earnings numbers reported by crosslisted companies are slightly less conservative than their Dutch GAAP counterparts, although the difference is not significant. This may imply that company managers view the Dutch GAAP earnings information as especially relevant in communicating with their shareholders irrespective of their origin. Further, the results seem to suggest that managers more or less mechanistically apply financial reporting requirements of foreign regulators.