Negin Khademi - Santiago, Chile e Department of Business Administration, School of Economics and Business, University of Almería, Spain

accounting . find that the impact of mandatory IFRS adoption on earnings quality increases for firms in countries with strong investor protection. These findings highlight the importance of an individual country investors’ protection on the quality of accounting information and the possibility that institutional environment of the countries influence the characteristics of reported accounting data. Thus, while renting the host countries’ superior corporate governance system may benefit the cross-listed firms, the extent to which they would benefit is also determined by the institutional factors of their home countries. We posit that the strength of investor protection of the home country explains the variations in the accounting quality of firms cross-listed in the US. On the one hand, accounting quality of cross-listed firms in strong investor protection countries would be different than in weak investor protection countries as home-country environment jointly-affect accounting quality. In this complementary effect perspective, accounting quality for the cross-listed firms is better than the non-cross listed firms only in strong investor protection countries but not in weak investor protection countries. In the institutional setting of the home-country that increases incentives for firms to engage in manipulating behaviour, the benefit of strong enforcement and litigation environment of the US on accounting quality can be exacerbated. When home country’s investor protection itself is weak, it would be difficult and costly for the US regulators to impose legal actions towards the cross-listed firms that do not abide to the SEC’s regulation. By allowing controlling shareholders and managers to exert significant influence to opportunistic reporting, accounting quality for cross-listed firms in weak institutional environment would not be different than other firms that are not cross-listed. On the other hand, there would be no differences in the accounting quality of crosslisted firms in strong investor protection countries and in weak investor protection countries. In this substitutive effect perspective, the strength of investor protection is not expected to influence the effect of cross-listing on accounting quality. The pressure to meet stringent requirement of listing in the US market would already curb the managerial opportunistic behaviour among cross-listed firms in weak investor protection countries, thereby improving their accounting quality as well, similar to those from the strong investor protection countries. Hence, the hypothesis is set as follows:

Cross-listing, Accounting quality, Earnings management, Value-relevance, Conservatism