Disclosure Practices of Foreign Companies Interacting with U.S. Markets


  • We would like to thank Standard & Poor's and Amra Balic, Sandeep Patel, George Dallas, and Ian Byrne for assistance with the Transparency and Disclosure Survey. We would also like to thank Dennis Campbell, Gregory Miller, Edward Riedl, the editor (Ray Ball), an anonymous referee, Brian Bushee (the discussant), and participants at the Work in Process seminar at Harvard Business School, the 2003 Journal of Accounting Research conference, and the Burton Workshop at Columbia Business School. The research assistance of Chris Allen, Sarah Eriksen, Bryan Lincoln, Kathleen Ryan, Sarah Woolverton, and James Zeitler is gratefully acknowledged. We are grateful for the funding of this research by the Harvard Business School. We thank IBES for providing data on analyst following.


We analyze the disclosure practices of companies as a function of their interaction with U.S. markets for a group of 794 firms from 24 countries in the Asia-Pacific and Europe. Our analysis uses the Transparency and Disclosure scores developed recently by Standard & Poor's. These scores rate the disclosure of companies from around the world using U.S. disclosure practices as an implicit benchmark. Results show a positive association between these disclosure scores and a variety of market interaction measures, including U.S. listing, U.S. investment flows, exports to, and operations in the United States. Trade with the United States at the country level, however, has an insignificant relationship with the disclosure scores. Our empirical analysis controls for the previously documented association between disclosure and firm size, performance, and country legal origin. Our results are broadly consistent with the hypothesis that cross-border economic interactions are associated with similarities in disclosure and governance practices.