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

Article

Kung, Fan-Hua, James, Kieran and Cheng, Chia-Ling. 2011. "Overseas listing and accounting conservatism: evidence from Chinese H-share companies ." Asian Review of Accounting. 19 (3), pp. 266-278. https://doi.org/10.1108/13217341111185164
Article Title

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

ERA Journal ID19073
Article CategoryArticle
AuthorsKung, Fan-Hua (Author), James, Kieran (Author) and Cheng, Chia-Ling (Author)
Journal TitleAsian Review of Accounting
Journal Citation19 (3), pp. 266-278
Number of Pages13
Year2011
Place of PublicationUnited Kingdom
ISSN1321-7348
1758-8863
Digital Object Identifier (DOI)https://doi.org/10.1108/13217341111185164
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.

Keywordsaccounting conservatism; accounting regulation; Basu model; accounting; communism; earnings conservatism; earnings quality; Maoism; China
ANZSRC Field of Research 2020350208. Investment and risk management
350199. Accounting, auditing and accountability not elsewhere classified
380110. International economics
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Byline AffiliationsTamkang University, Taiwan
School of Accounting, Economics and Finance
Fu Jen Catholic University, Taiwan
Institution of OriginUniversity of Southern Queensland
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