Factors Explaining the Change in the Usefulness of Quarterly Earnings Announcements of U.S. Cross-Listed Firms

• In Event: Information Content of Accounting Information

Abstract

This study examines whether convergence of accounting standards increases the usefulness of quarterly earnings of U.S. cross-listed firms over time. To investigate this issue, this study calculates the absolute abnormal return around the release of quarterly earnings information during 2003–2011 and compares the cross-sectional average of cumulative absolute abnormal return based on two period, three periods, and yearly basis comparisons. This study further regresses cumulative abnormal return on a time trend. This study finds evidences to support that the convergence of accounting standards leads to the higher content of quarterly earnings information. The time trend coefficient remains significantly positive after variables that potentially explain earnings information content are controlled. This result indicates that financial information under the converged IFRSs and U.S. GAAP over time is priced by the market and that the usefulness of financial information under converged IFRSs has increased.

Authors

• Singgih Wijayana, Gadjah Mada University

• Evi Rahmawati, Muhammadyah University of Yogyakarta