Is conditional conservatism higher for overseas-listed Chinese companies on the Hong Kong Stock Exchange?

Kung, Fan-Hua and James, Kieran and Cheng, Chia-Ling (2010) Is conditional conservatism higher for overseas-listed Chinese companies on the Hong Kong Stock Exchange? Irish Accounting Review, 17 (1). pp. 31-53. ISSN 0791-9638

Abstract

This paper examines conditional accounting conservatism (Basu, 1997) of Chinese companies that are overseas listed in Hong Kong as H-shares. Due to cultural, historical and political factors, H-share companies are expected to report no more conservatively than their Chinese counterparts that are not overseas listed. The institutional setting of H-share companies, with concentrated state ownership structures, bureaucratic management incentives and political interference, are expected to impede the supply of conservative reporting. Hong Kong listed H-share companies are exposed to the threat of litigation, competitive market forces and a strict regulatory regime in Hong Kong. However, despite these factors, we expect them to report less conservatively than native Hong Kong companies. This is because of the dominance of local institutional incentives that are culturally based. Consistent with our predictions, we find that H-share companies report aggressively whereas matched Chinese companies that are not overseas listed report neutrally. In addition, H-share companies are less conservative than native Hong Kong companies. Our evidence suggests that the location of listing has little effect on conditional conservatism because overseas listed Chinese companies retain a significant exposure to their domestic environment


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: c.Blackhall Publishing.
Depositing User: Dr Kieran James
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 14 Feb 2011 03:21
Last Modified: 08 Oct 2013 05:22
Uncontrolled Keywords: listed companies; overseas listings
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9199 Other Economic Framework > 919999 Economic Framework not elsewhere classified
E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
URI: http://eprints.usq.edu.au/id/eprint/18339

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