Disclosure Quality of U.S. Listed Chinese Companies: A Direct Comparison with U.S. Domestic Companies

Research Article
Open access

Disclosure Quality of U.S. Listed Chinese Companies: A Direct Comparison with U.S. Domestic Companies

Qinyi Sun 1* , Jingyu Luo 2 , Jiawei Shi 3
  • 1 St. Paul’s School, Concord, NH 03301, USA    
  • 2 Thurgood Marshall College, University of California San Diego, La Jolla, CA 92093, USA    
  • 3 O’Neill School of Public and Environmental Affairs, Indiana University, Bloomington, IN 47405, USA    
  • *corresponding author qinyiwendysun@gmail.com
Published on 21 March 2023 | https://doi.org/10.54254/2754-1169/3/2022789
AEMPS Vol.3
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-15-7
ISBN (Online): 978-1-915371-16-4

Abstract

This paper tests whether there is a discrepancy between the disclosure quality of U.S. listed Chinese companies and that of U.S. based companies. In order to numerically measure disclosure quality, six indices are applied to 40 sample companies, including 20 U.S. listed Chinese companies and 20 U.S. domestic companies, and each index is followed by a paired sample t-test or a Chi-square test to quantify if there is a significant difference between the disclosure qualities of the two groups of companies. Based on our sample companies, there is no significant discrepancy between the two sets of companies’ financial reporting qualities. This work contributes to the literature of cross-listed Chinese companies by focusing on the fundamental question whether these companies’ reporting is truthful.

Keywords:

Disclosure quality, U.S. listed Chinese companies, Overseas listing

Sun,Q.;Luo,J.;Shi,J. (2023). Disclosure Quality of U.S. Listed Chinese Companies: A Direct Comparison with U.S. Domestic Companies. Advances in Economics, Management and Political Sciences,3,216-245.
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References

[1]. Feng, Y., & Chen, C. (2021). The Impact of Financial Fraud on Financial Risks: A Case Study of Luckin Coffee. Advances in Economics, Business and Management Research, 190. https://doi.org/10.2991/aebmr.k.210917.079

[2]. Yang, J., Chung, J., & Steinberg, J. (2020, June 29). Coffee's for Closers: How a Short Seller's Warning Helped Take Down Luckin Coffee. The Wall Street Journal. Retrieved Octo-ber 16, 2021, from https://www.wsj.com/articles/coffees-for-closers-how-a-short-sellers-warning-helped-take-down-luckin-coffee-11593423002

[3]. Ang, J. S., Jiang, Z., & Wu, C. (2014). Good Apples, Bad Apples: Sorting Among Chinese Companies Traded in the U.S. Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2024826

[4]. SEC Charges China-Based Company and Top Executive with Inflating Financial Results through Phony Sales. (2012, September 4). U.S. Securities and Exchange Commission. Retrieved October 18, 2021, from https://www.sec.gov/news/press-release/2012-2012-175htm

[5]. SEC Charges Chinese Company and Executives with Lying About Asset Values and Use of IPO Proceeds. (2012, April 23). U.S. Securities and Exchange Commission. Retrieved October 18, 2021, from https://www.sec.gov/news/press-release/2012-2012-74htm

[6]. An, T. (2014, June). Case Study on Accounting Fraud of U.S.-Listed Chinese Companies. DSpace@MIT. Retrieved October 16, 2021, from https://dspace.mit.edu/handle/1721.1/90232

[7]. Carcello, J. V., Carver, B. T., Lennox, C. S., & Neal, T. L. (2014). When Bonding Fails: Audit Firm Oversight of US-Listed Chinese Companies [Abstract]. Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419152

[8]. Disclosure Considerations for China-Based Issuers. (2020, November 23). U.S. Securities and Exchange Commission. Retrieved October 16, 2021, from https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers

[9]. Leuz, C., Nanda, D., & Wysocki, P. (2003). Earnings management and investor protection: An international comparison. Journal of Financial Economics, 69(3), 505-527. https://doi.org/10.1016/S0304-405X(03)00121-1

[10]. Rotblut, C. (2017, June). Using Accruals to Judge How Persistent Earnings Will Be. Ameri-can Association of Individual Investors. Retrieved October 17, 2021, from https://www.aaii.com/journal/article/using-accruals-to-judge-how-persistent-earnings-will-be

[11]. Kenton, W. (2020, December 27). SEC Form 20-F (M. James, Ed.). Investopedia. Retrieved October 17, 2021, from https://www.investopedia.com/terms/s/sec-form-20-f.asp

Cite this article

Sun,Q.;Luo,J.;Shi,J. (2023). Disclosure Quality of U.S. Listed Chinese Companies: A Direct Comparison with U.S. Domestic Companies. Advances in Economics, Management and Political Sciences,3,216-245.

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About volume

Volume title: Proceedings of the 6th International Conference on Economic Management and Green Development (ICEMGD 2022), Part Ⅰ

ISBN：978-1-915371-15-7(Print) / 978-1-915371-16-4(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2022
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.3
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Feng, Y., & Chen, C. (2021). The Impact of Financial Fraud on Financial Risks: A Case Study of Luckin Coffee. Advances in Economics, Business and Management Research, 190. https://doi.org/10.2991/aebmr.k.210917.079

[2]. Yang, J., Chung, J., & Steinberg, J. (2020, June 29). Coffee's for Closers: How a Short Seller's Warning Helped Take Down Luckin Coffee. The Wall Street Journal. Retrieved Octo-ber 16, 2021, from https://www.wsj.com/articles/coffees-for-closers-how-a-short-sellers-warning-helped-take-down-luckin-coffee-11593423002

[3]. Ang, J. S., Jiang, Z., & Wu, C. (2014). Good Apples, Bad Apples: Sorting Among Chinese Companies Traded in the U.S. Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2024826

[4]. SEC Charges China-Based Company and Top Executive with Inflating Financial Results through Phony Sales. (2012, September 4). U.S. Securities and Exchange Commission. Retrieved October 18, 2021, from https://www.sec.gov/news/press-release/2012-2012-175htm

[5]. SEC Charges Chinese Company and Executives with Lying About Asset Values and Use of IPO Proceeds. (2012, April 23). U.S. Securities and Exchange Commission. Retrieved October 18, 2021, from https://www.sec.gov/news/press-release/2012-2012-74htm

[6]. An, T. (2014, June). Case Study on Accounting Fraud of U.S.-Listed Chinese Companies. DSpace@MIT. Retrieved October 16, 2021, from https://dspace.mit.edu/handle/1721.1/90232

[7]. Carcello, J. V., Carver, B. T., Lennox, C. S., & Neal, T. L. (2014). When Bonding Fails: Audit Firm Oversight of US-Listed Chinese Companies [Abstract]. Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419152

[8]. Disclosure Considerations for China-Based Issuers. (2020, November 23). U.S. Securities and Exchange Commission. Retrieved October 16, 2021, from https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers

[9]. Leuz, C., Nanda, D., & Wysocki, P. (2003). Earnings management and investor protection: An international comparison. Journal of Financial Economics, 69(3), 505-527. https://doi.org/10.1016/S0304-405X(03)00121-1

[10]. Rotblut, C. (2017, June). Using Accruals to Judge How Persistent Earnings Will Be. Ameri-can Association of Individual Investors. Retrieved October 17, 2021, from https://www.aaii.com/journal/article/using-accruals-to-judge-how-persistent-earnings-will-be

[11]. Kenton, W. (2020, December 27). SEC Form 20-F (M. James, Ed.). Investopedia. Retrieved October 17, 2021, from https://www.investopedia.com/terms/s/sec-form-20-f.asp

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