Abstract
Exploiting the staggered implementation of Multilateral Memorandum of Understanding (MMoU) that facilitates cross-border enforcement cooperation, we examine the causal effect of changes in cross-border regulatory enforcement capacity on firms’ asymmetric cost behavior. Consistent with the view that strengthening cross-border regulatory enforcement of securities laws enhances corporate governance and improves information transparency, we find that U.S.-listed foreign firms reduce the degree of cost stickiness after the MMoU signage. This effect is more pronounced for (1) firms characterized with poor information quality, (2) firms from countries with weaker institutions, and (3) firms from countries where the memorandum more effectively fosters cross-border cooperation. Overall, our study demonstrates the effectiveness of cross-border institutional efforts on shaping managers’ opportunistic behavior.
| Original language | English |
|---|---|
| Number of pages | 32 |
| Journal | Journal of International Accounting Research |
| DOIs | |
| Publication status | E-pub ahead of print - 10 Feb 2025 |
Bibliographical note
We appreciate the helpful comments and feedback from the editor, two anonymous reviewers, Kun-Chih Chen, Steve Lin, Zheng Wang, Jingran Zhao, and conference participants at the 2024 11th International Conference of the Journal of International Accounting Research. Raymond M. K. Wong and Tracy H. Y. Yeung gratefully acknowledge financial support from City University of Hong Kong and the Department of Accountancy at Lingnan University, respectively. Cephas Simon Peter Dak-Adzaklo and James Xede have no conflicts of interests to disclose.Keywords
- MMoU
- regulatory enforcement
- cost asymmetry
- cross-listed firms