ARTICLE
Corporate disclosure differences around the world: International evidence
Zihua Liu,
Ziyao San,
Albert Tsang,
Li Yu,
Zihua Liu
Department of Finance,International Business School Suzhou, Xi'an Jiaotong–Liverpool University, Suzhou, China
Search for more papers by this authorCorresponding Author
Ziyao San
College of Business Administration, Capital University of Economics and Business, Beijing, China
Correspondence
Ziyao San, College of Business Administration, Capital University of Economics and Business, Beijing, China.
Email: [email protected]
Search for more papers by this authorAlbert Tsang
SUSTech Business School, Southern University of Science and Technology, Shenzhen, China
Search for more papers by this authorZihua Liu,
Ziyao San,
Albert Tsang,
Li Yu,
Zihua Liu
Department of Finance,International Business School Suzhou, Xi'an Jiaotong–Liverpool University, Suzhou, China
Search for more papers by this authorCorresponding Author
Ziyao San
College of Business Administration, Capital University of Economics and Business, Beijing, China
Correspondence
Ziyao San, College of Business Administration, Capital University of Economics and Business, Beijing, China.
Email: [email protected]
Search for more papers by this authorAlbert Tsang
SUSTech Business School, Southern University of Science and Technology, Shenzhen, China
Search for more papers by this authorAbstract
We examine whether and how variations in country-level institutional factors explain the intensity, diversity and informativeness of corporate disclosures around the world. Using a comprehensive corporate disclosure dataset containing more than 100 types of disclosures from firms domiciled in 35 countries, we examine the effect of four core country-level institutional factors—legal system, creditor/investor rights, political process and societal characteristics—on corporate disclosures. Our results suggest that the country-level institutional factor, which is likely to capture the legal system of a country, is negatively associated with the intensity, diversity and informativeness of disclosure. Moreover, our results suggest that the level of creditor/investor rights protection, political process and societal characteristics can also consistently affect the production, diversity and informativeness of disclosures. Overall, our evidence broadens our collective understanding of how core institutional factors at the society and country levels systematically explain corporate disclosures and their associated informativeness.
Open Research
DATA AVAILABILITY STATEMENT
The raw data that support the findings of this study are available from the corresponding author, upon reasonable request.
REFERENCES
- Ajinkya, B., Bhojraj, S., & Sengupta, P. (2005). The association between outside directors, institutional investors and the properties of management earnings forecasts. Journal of Accounting Research, 43(3), 343–375.
- Alesina, A., Devleeschauwer, A., Easterly, W., Kurlat, S., & Wacziarg, R. (2003). Fractionalization. Journal of Economic Growth, 8(2), 155–194.
- Alford, A., Jones, J., Leftwich, R., & Zmijewski, M. (1993). Relative informativeness of accounting disclosures in different countries. Journal of Accounting Research, 31, 183–223.
- Ali, A., & Hwang, L. (2000). Country-specific factors related to financial reporting and the value relevance of accounting data. Journal of Accounting Research, 38(1), 1–21.
- Ali, A., & Zhang, W. (2015). CEO tenure and earnings management. Journal of Accounting and Economics, 59(1), 60–79.
- Atwood, T. J., Drake, M. S., & Myers, J. N. (2010). Book-tax conformity, earnings persistence and the association between earnings and future cash flows. Journal of Accounting and Economics, 50(1), 111–125.
- Bae, K., Tan, H., & Welker, M. (2008). International GAAP differences: The impact on foreign analysts. The Accounting Review, 83(3), 593–628.
- Bai, J., Philippon, T., & Savov, A. (2016). Have financial markets become more informative? Journal of Financial Economics, 122, 625–654.
- Ball, R. (2001). Infrastructure requirements for an economically efficient system of public financial reporting and disclosure. Brookings-Wharton Papers on Financial Services, 2001(1), 127–169.
10.1353/pfs.2001.0002 Google Scholar
- Ball, R., Kothari, S. P., & Robin, A. (2000). The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics, 29(1), 1–51.
- Ball, R., Robin, A., & Wu, J. (2003). Incentives versus standards: Properties of accounting income in four east Asia countries. Journal of Accounting and Economics, 36(1), 235–270.
- Barth, M. E., Beaver, W. H., & Landsman, W. R. (1998). Relative valuation roles of equity book value and net income as a function of financial health. Journal of Accounting and Economics, 25(1), 1–34.
- Beck, T., Demirguc-Kunt, A., & Levine, R. (2001). The financial structure database. In A. Demirguc-Kunt & R. Levine (Eds.), Financial structure and economic growth: A cross-country comparison of banks, markets, and development (pp. 17–80). MIT Press.
10.7551/mitpress/3001.003.0005 Google Scholar
- Beck, T., Demirguc-Kunt, A., & Levine, R. (2003). Law, endowments, and finance. Journal of Financial Economics, 70(2), 137–181.
- Bhattacharya, U., Daouk, H., & Welker, M. (2003). The world price of earnings opacity. The Accounting Review, 78(3), 641–678.
- Boutchkova, M., Doshi, H., Durney, A., & Molchanov, A. (2012). Precarious polities and return volatility. The Review of Financial Studies, 25(4), 1111–1154.
- Bradshaw, M., Bushee, B., & Miller, S. (2004). Accounting choice, home bias, and US investment in non-US firms. Journal of Accounting Research, 42(5), 795–841.
- Brochet, F., Naranjo, P., & Yu, G. (2016). The capital market consequences of language barriers in the conference calls of non-U.S. firms. The Accounting Review, 91(4), 1023–1049.
- Brown, P., Preiato, J., & Tarca, A. (2014). Measuring country differences in enforcement of accounting standards: An audit and enforcement proxy. Journal of Business Finance & Accounting, 41(1-2), 1–52.
- Bushman, R. M., & Piotroski, J. D. (2006). Financial reporting incentives for conservative accounting: The influence of legal and political institutions. Journal of Accounting and Economics, 42(1), 107–148.
- Bushman, R. M., Piotroski, J. D., & Smith, A. J. (2004). What determines corporate transparency? Journal of Accounting Research, 42(2), 207–252.
- Callen, J., Hope, P. K., & Segal, D. (2005). Domestic and foreign earnings, stock return variability and the impact of investor sophistication. Journal of Accounting Research, 43(3), 337–412.
- Cao, Y., Myers, L. A., Tsang, A., & Yang, Y. G. (2017). Management forecast and the cost of equity capital: International evidence. Review of Accounting Studies, 22(2), 791–838.
- Cao, Z., & Narayanamoorthy, G. S. (2011). The effect of litigation risk on management earnings forecasts. Contemporary Accounting Research, 28(1), 125–173.
- Chaney, P. K., Faccio, M., & Parsley, D. (2010). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1), 58–76.
- Chang, X., Dasgupta, S., & Hilary, G. (2009). The effect of auditor quality on financing decisions. The Accounting Review, 84(4), 1085–1117.
- Chen, C., Chen, P., & Jin, Q. (2015). Economic freedom, investment flexibility, and equity value: A cross-country study. The Accounting Review, 90(5), 1839–1870.
- Chen, L., Dong, Y., Ng, J., & Tsang, A. (2019). Cross-listings and voluntary disclosure: International evidence. Journal of Financial Reporting, 4(2), 89–113.
- Chen, L., Liao, C., Tsang, A., & Yu, L. (2023). CEO career concerns in early tenure and corporate social responsibility reporting. Contemporary Accounting Research, 40(3), 1545–1575.
- Chen, T., Harford, J., & Lin, C. (2015). Do analysts matter for governance? Evidence from natural experiments. Journal of Financial Economics, 115(2), 383–410.
- Christensen, H. B., Hail, L., & Leuz, C. (2013). Mandatory IFRS reporting and changes in enforcement. Journal of Accounting and Economics, 56(2-3), 147–177.
- Chu, H., Liu, N., & Tsang, A. (2022). Labor market institutions, environmental disclosure, and environmental impacts. Journal of International Accounting Research, 22(2), 31–55.
- Chu, H., Liu, N., & Tsang, A. (2023). Country-level institutions and transparency of directors’ information disclosure: The role of labor market. Emerging Markets Finance and Trade, 59(9), 2928–2953.
- Collins, W. D., Kothari, S. P., Shanken, J., & Sloan, R. G. (1994). Lack of timeliness and noise as explanations for the low contemporaneous return-earnings association. Journal of Accounting and Economics, 18(3), 289–324.
- Core, J. E., Hail, L., & Verdi, R. S. (2015). Mandatory disclosure quality, inside ownership, and cost of capital. European Accounting Review, 24(1), 1–29.
- Covrig, V., DeFond, M. L., & Hung, M. (2007). Home bias, foreign mutual fund holdings, and the voluntary adoption of international accounting standards. Journal of Accounting Research, 45(1), 41–70.
- Dang, L. T., Moshirian, F., & Zhang, B. (2016). Commonality in news around the world. Journal of Financial Economics, 116(1), 82–110.
- Daske, H., Hail, L., Leuz, C., & Verdi, R. (2013). Adopting a label: Heterogeneity in the economic consequences around IAS/IFRS adoptions. Journal of Accounting Research, 51(3), 495–547.
- DeFond, M. L., Hung, M., & Trezevant, R. (2007). Investor protection and the information content of annual earnings announcements: International evidence. Journal of Accounting and Economics, 43(1), 37–67.
- Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86(1), 59–100.
- Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., & Yang, Y. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. The Accounting Review, 87(3), 723–759.
- Diamond, D., & Verrecchia, R. E. (1991). Disclosure, liquidity, and the cost of capital. Journal of Finance, 46(4), 1325–1359.
- Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The law and economics of self-dealing. Journal of Financial Economics, 88(3), 430–465.
- Doupnik, T. S. (2008). Influence of culture on earnings management: A note. Journal of Accounting, Finance and Business Studies, 44(3), 317–340.
- Dyck, A., & Zingales, L. (2004). Private benefits of control: An international comparison. Journal of Finance, 59(2), 537–600.
- Florou, A., & Pope, P. F. (2012). Mandatory IFRS adoption and institutional investment decisions. The Accounting Review, 87(6), 1993–2025.
- Francis, J., Nanda, D., & Olsson, P. M. (2008). Voluntary disclosure, earnings quality, and cost of capital. Journal of Accounting Research, 46(1), 53–99.
- Frost, C. A., Gordon, E. A., & Hayes, A. F. (2006). Stock exchange disclosure and market development: An analysis of 50 international exchanges. Journal of Accounting Research, 44(3), 437–483.
- Gu, Z., Ng, J., & Tsang, A. (2018). Mandatory IFRS adoption and management forecasts: The impact of enforcement changes. China Journal of Accounting Research, 12(1), 33–61.
- Guan, Y., Lobo, G. J., Tsang, A., & Xin, X. (2019). Societal trust and management earnings forecast. The Accounting Review, 95(5), 149–184.
- Hail, L., & Leuz, C. (2006). International differences in the cost of equity capital: Do legal institutions and securities regulation matter? Journal of Accounting Research, 44(39), 485–531.
10.1111/j.1475-679X.2006.00209.x Google Scholar
- Haw, I. M., Hu, B., Hwang, L., & Wu, W. (2004). Ultimate ownership, income management, and legal and extra-legal institutions. Journal of Accounting Research, 42(2), 423–462.
- Haw, I. M., Hu, B., Hwang, L., & Wu, W. (2012). Investor protection and price informativeness about future earnings: International evidence. Review of Accounting Studies, 17, 389–419.
- Hirst, D. E., Koonce, L., & Venkataraman, S. (2008). Management earnings forecasts: A review and framework. Accounting Horizons, 22(3), 315–338.
- Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software of the mind ( 3rd ed.). McGraw-Hill.
- Hope, O. K., Kang, T., & Kim, J. B. (2013). Voluntary disclosure practices by foreign firms cross-listed in the United States. Journal of Contemporary Accounting and Economics, 9(1), 50–66.
10.1016/j.jcae.2013.01.003 Google Scholar
- Isidro, H., Nanda, D., & Wysocki, P. D. (2020). On the relation between financial reporting quality and country attributes: Research challenges and opportunities. The Accounting Review, 95(3), 279–314.
- Jaggi, B., & Low, P. (2000). Impact of culture, market forces, and legal system on financial disclosures. International Journal of Accounting, 35(4), 495–519.
10.1016/S0020-7063(00)00076-5 Google Scholar
- Kanagaretnam, K., Lim, C., & Lobo, G. (2013). Effects of international institutional factors on earnings quality of banks. Journal of Banking and Finance, 39(2), 87–106.
- Kanagaretnam, K., Lim, C. Y., & Lobo, G. J. (2011). Effects of national culture on earnings quality of banks. Journal of International Business Studies, 42(6), 835–874.
- Karamanou, I., & Vafeas, N. (2005). The association between corporate boards, audit committees, and management earnings forecasts: An empirical analysis. Journal of Accounting Research, 43(3), 453–485.
- Kasznik, R., & Lev, B. (1995). To warn or not to warn: Management disclosures in the face of earnings surprise. The Accounting Review, 70(1), 113–134.
- Land, J., & Lang, M. H. (2002). Empirical evidence on the evolution of international earnings. The Accounting Review, 77(1), 115–133.
10.2308/accr.2002.77.s-1.115 Google Scholar
- Lang, M. H., Lins, K. V., & Maffett, M. (2012). Transparency, liquidity, and valuation: International evidence on when transparency matters most. Journal of Accounting Research, 50(3), 729–774.
- Lang, M. H., & Lundholm, R. J. (1993). Cross-sectional determinants of analyst ratings of corporate disclosures. Journal of Accounting Research, 31(2), 246–271.
- Lang, M. H., & Stice-Lawrence, L. (2015). Textual analysis and international financial reporting: Large sample evidence. Journal of Accounting and Economics, 60(2), 110–135.
- La Porta, R. (1999). The quality of government. Journal of Law, Economics, and Organization, 15(1), 222–279.
- La Porta, R., Lopez-de-Silanes, F., Sheifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155.
- La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2006). What works in securities laws? Journal of Finance, 61(1), 1–32.
- Leuz, C. (2010). Different approaches to corporate reporting regulation: How jurisdictions differ and why. Accounting and Business Research, 40(3), 229–256.
- Leuz, C., Nanda, D., & Wysocki, P. (2003). Earnings management and investor protection: An international comparison. Journal of Financial Economics, 69(3), 505–527.
- Li, Q., Maydew, E. L., Willis, R. H., & Xu, L. (2022). Corporate tax behavior and political uncertainty: Evidence from national elections around the world. Journal of Business Finance & Accounting, 49(9-10), 1605–1641.
- Li, W., Ng, J., Tsang, A., & Urcan, O. (2019). Country-level institutions and management earnings forecasts. Journal of International Business Studies, 50(1), 48–82.
- Li, X. (2010). The impacts of product market competition on the quantity and quality of voluntary disclosures. Review of Accounting Studies, 15(3), 663–711.
- Li, X., & Yang, H. I. (2016). Mandatory financial reporting and voluntary disclosure: The effect of IFRS adoption and management forecasts. The Accounting Review, 91(3), 933–953.
- Lundholm, R. J., & Myers, L. A. (2002). Bringing the future forward: The effect of disclosure on the returns-earnings relation. Journal of Accounting Research, 40(3), 809–839.
- Mueller, G., Gernon, H., & Meek, G. (1994). Accounting: An international perspective. Business One Irwin.
- Nanda, D., & Wysocki, P. (2011). The relation between trust and accounting quality (pp. 691–703). Boston University.
- Nguyen, N., & Truong, C. (2013). The information content of stock markets around the world: A cultural explanation. Journal of International Financial Markets, Institutions and Money, 26, 1–29.
- Pevzner, M., Xie, F., & Xin, X. (2015). When firms talk to investors listen? The role of trust in stock market reactions to corporate earnings announcements. Journal of Financial Economics, 117(1), 190–223.
- Pope, F. P., & Walker, M. (1999). International differences in the timeliness, conservatism, and classification of earnings. Journal of Accounting Research, 37, 53–87.
- Siegel, J. P., Licht, A. N., & Schwartz, S. H. (2011). Egalitarianism and international investment. Journal of Financial Economics, 102(3), 621–642.
- Skinner, D. J. (1994). Why firms voluntarily disclose bad news. Journal of Accounting Research, 32(1), 38–60.
- Srinivasan, S., Wahid, A. S., & Yu, G. (2015). Admitting mistakes: Home country effect on the reliability of restatement reporting. The Accounting Review, 90(3), 1201–1240.
- Stocken, P. C. (2000). Credibility of voluntary disclosure. The RAND Journal of Economics, 31(2), 359–374.
- Stulz, R. M., & Williamson, R. (2003). Culture, openness, and finance. Journal of Financial Economics, 70(3), 313–349.
- Tsang, A., Xiang, Y., & Yu, L. (2023). Cross-border regulatory cooperation and analyst forecasts. International Review of Financial Analysis, 90, 102844.
- Tsang, A., Xiang, Y., & Yu, M. (2022). Cross-border regulatory enforcement and corporate voluntary disclosure. Journal of Business Finance & Accounting, 50(3-4), 482–523.
- Tsang, A., Xie, F., & Xin, X. (2019). Foreign institutional investors and corporate voluntary disclosure around the world. The Accounting Review, 94(5), 319–348.
- Wang, I. Y. (2007). Private earnings guidance and its implications for disclosure regulation. The Accounting Review, 82(5), 1299–1332.
