The Influence Of Foreign Operations And Their Disclosure On Earnings Quality

This paper investigates the influence of foreign operations and their financial disclosure on earnings quality in terms of accounting conservatism (timely recognizing losses). In a large (7,311 corporate years) sample of U.S. corporations, we find earnings of firms with multinational operations (MNC...

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Bibliographic Details
Published inThe international business & economics research journal Vol. 9; no. 3; p. 109
Main Authors Hu, Fang, Yang, Sixian, Giacomino, Don E.
Format Journal Article
LanguageEnglish
Published Littleton The Clute Institute 19.12.2010
Subjects
Accounting
Cash flow
Conservatism
Disclosure
Financial disclosure
Financial reporting
Foreign operations of US corporations
Global economy
Income taxes
Influence
Investigations
Moral hazard
Multinational corporations
Profitability
Profits
Quality
Regulation
Studies
United States > US
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Summary:This paper investigates the influence of foreign operations and their financial disclosure on earnings quality in terms of accounting conservatism (timely recognizing losses). In a large (7,311 corporate years) sample of U.S. corporations, we find earnings of firms with multinational operations (MNCs) tend to be of lower quality and are reported less conservatively than those without foreign operations (domestic firms). Further, by looking at the geographic segment information disclosed by MNCs, we find that earnings conservatism gets improved if a MNC reports “clean” segment information of foreign operations; wherein operating results of MNC are broken down by geographic regions (continent or country) and reported separately. This study has implications for monitoring foreign operations and regulations that may improve earnings quality in the global economy.
ISSN:1535-0754
2157-9393
DOI:10.19030/iber.v9i3.541