According to a new study, foreign-based companies provide higher quality disclosures than their U.S. based counterparts. In fact, firms based in far away countries that have disclosure laws that are vastly different often have the best disclosures as evidenced by clearer writings included in their annual reports and press releases. Language differences also appear to have a positive impact on a foreign company’s disclosures.
The report suggests that foreign based companies are compensating for their perceived struggle to articulate their operations in a clear and concise fashion. This results in business descriptions and discussions of financial results that are easier to understand than those presented by U.S. companies. The report also concludes that efforts to make disclosures more readable are generally successful in that these companies often enjoy greater U.S. institutional investor participation.
The study entitled Restoring the tower of Babel: How foreign firms communicate with U.S. investors will be published in the July 2014 edition of The Accounting Review. The University of British Columbia’s Sauder School of Business study reviewed corporate disclosure documents during the period from 2000 to 2012 and compared the Management Discussion and Analysis section of 10-Ks of almost 3,500 foreign companies listed in the U.S. with their U.S. based competitors.
Go figure!
The report suggests that foreign based companies are compensating for their perceived struggle to articulate their operations in a clear and concise fashion. This results in business descriptions and discussions of financial results that are easier to understand than those presented by U.S. companies. The report also concludes that efforts to make disclosures more readable are generally successful in that these companies often enjoy greater U.S. institutional investor participation.
The study entitled Restoring the tower of Babel: How foreign firms communicate with U.S. investors will be published in the July 2014 edition of The Accounting Review. The University of British Columbia’s Sauder School of Business study reviewed corporate disclosure documents during the period from 2000 to 2012 and compared the Management Discussion and Analysis section of 10-Ks of almost 3,500 foreign companies listed in the U.S. with their U.S. based competitors.
Go figure!
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