Overseas listing and accounting conservatism: evidence from Chinese H‐share companies

Fan‐Hua Kung (Department of Accounting, Tamkang University, New Taipei City, Taiwan)
Kieran James (School of Accounting, Economics and Finance, University of Southern Queensland, Toowoomba, Australia)
Chia‐Ling Cheng (Department of Accounting, Fu‐Jen Catholic University, New Taipei City, Taiwan)

Asian Review of Accounting

ISSN: 1321-7348

Publication date: 20 September 2011

Abstract

Purpose

The objective of this paper is to examine the incremental effects of overseas listing on earnings conservatism. In particular, it investigates whether mainland Chinese companies listed “overseas” in Hong Kong exhibit a higher degree of earnings conservatism than companies without overseas‐listing.

Design/methodology/approach

The paper employs the concept of “conditional conservatism” and adopts Basu’s (1997) conservatism model, examining data for Chinese companies overseas listed on the Stock Exchange of Hong Kong as H‐shares, to test hypothesis concerned with the difference in the speed with which economic gains and losses are captured in accounting earnings.

Findings

The empirical findings indicate that both overseas‐listed and China‐only‐listed Chinese companies demonstrate a minimal degree of earnings conservatism in the earlier sample sub‐period. However, companies listed overseas provide a higher degree of earnings conservatism overall. Furthermore, this conservatism becomes statistically significant in the 2006 to 2008 sub‐period.

Originality/value

The evidence in this study shows that differences in earnings conservatism arise from differential information demands and differential regulations. Hence the findings have direct policy implications for the regulatory agencies in China and Vietnam and in the ex‐communist countries further afield such as Russia, the former Soviet Union, and Eastern Europe.

Keywords

Citation

Kung, F., James, K. and Cheng, C. (2011), "Overseas listing and accounting conservatism: evidence from Chinese H‐share companies", Asian Review of Accounting, Vol. 19 No. 3, pp. 266-278. https://doi.org/10.1108/13217341111185164

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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