Legal Environments and Accounting Information Comparability

Abstract

The dramatic rise in global investment activities increases the demand for more comparable accounting information across countries. The literature suggests that legal environments affect accounting information comparability: firms from common law jurisdictions have higher information comparability than firms from code law jurisdictions. This study examines whether information comparability improves when firms from code law legal jurisdictions are listed in common law jurisdictions. Specifically, we test whether firms from China, a code law jurisdiction, improve their information comparability by listing in Hong Kong, a common law jurisdiction. After controlling for firm-specific characteristics, we find that listing in Hong Kong by Chinese firms actually led to lower comparability.