Financial Reporting of Offshore Firms : Are They Less Conservative?

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Original languageEnglish
Publication statusPublished - 20 Apr 2011

Conference

Title2011 Annual Congress of European Accounting Association
PlaceItaly
CityRome
Period20 - 22 April 2011

Abstract

This paper investigates conservatism in financial reporting of offshore firms that operate in offshore financial centers (OFCs) through legal registration or incorporation or, indirectly, through subsidiaries or affiliates. Our results, drawn from a large sample of offshore firms from 21 OFCs over the 10-year sample period of 1998-2007, show that financial reporting is, in general, more aggressive or less conservative for offshore firms than for non-offshore firms. We also find that financial reporting is less conservative for firms registered or headquartered in OFCs than for those with affiliates or subsidiaries in OFCs but with headquarters in their home countries. We provide evidence that conservatism in financial reporting significantly decreases after firms migrate to or set up affiliates in OFCs. Overall, our results are consistent with the view that offshore firms tend to withhold bad news and to accelerate the release of good news, thereby leading to the delayed recognition of bad news as a loss, and accelerated recognition of good news as a gain.

Citation Format(s)

Financial Reporting of Offshore Firms : Are They Less Conservative? / KIM, Jeong Bon; Li, Tie Mei.

2011. Paper presented at 2011 Annual Congress of European Accounting Association, Rome, Italy.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review