Accounting Papers

Document Type

Journal Article

Date of this Version

12-2004

Publication Source

Journal of Accounting Research

Volume

42

Issue

5

Start Page

795

Last Page

841

DOI

10.1111/j.1475-679X.2004.00157.x

Abstract

This paper examines the relation between accounting choice and U.S. institutional investor ownership in non-U.S. firms. We predict that U.S. investors exhibit home bias in their preference for accounting methods conforming to U.S. Generally Accepted Accounting Principles (GAAP) because such methods are more familiar, reduce information processing costs, and are perceived as higher quality. We find that firms exhibiting higher levels (changes) of U.S. GAAP conformity have greater levels (changes) of U.S. institutional ownership. Lead-lag regressions suggest that increases in U.S. GAAP conformity precede increases in U.S. investment, but changes in U.S. institutional holdings do not precede changes in accounting methods. We also find that the positive relation between U.S. GAAP conformity and U.S. investment holds regardless of a firm's visibility to U.S. investors (e.g., American Depositary Receipt listing, stock index membership, analyst following, firm size). However, we find that U.S. GAAP conformity has a significantly greater impact among firms already visible to U.S. investors.

Copyright/Permission Statement

This is the peer reviewed version of the following article: BRADSHAW, M. T., BUSHEE, B. J. and MILLER, G. S. (2004), Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms. Journal of Accounting Research, 42: 795–841., which has been published in final form at doi: 10.1111/j.1475-679X.2004.00157.x This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

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Date Posted: 27 November 2017

This document has been peer reviewed.