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Are offshore firms less conservative in financial reporting? International evidence
Author(s) -
Kim JeongBon,
Li Tie Mei
Publication year - 2018
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/jifm.12077
Subject(s) - submarine pipeline , multinational corporation , subsidiary , business , sample (material) , finance , monetary economics , financial system , economics , oceanography , chemistry , chromatography , geology
Using a large sample of multinational firms operating in offshore financial centers (offshore firms) from 1998 to 2014, this study investigates the financial reporting implications of economic activities involving offshore financial centers ( OFC s). We find that offshore firms have a greater tendency to report less conservatively than non‐offshore firms. Moreover, we find that financial reporting is less conservative for firms operating in OFC s with more pronounced OFC attributes than for those with less pronounced OFC attributes. Finally, we also find that firms with their headquarters registered in OFC s (type I offshore firms) tend to adopt less conservative accounting practices than those with subsidiaries operating in OFC s (type II offshore firms). Our findings provide useful insights into how a multinational firm's operation in OFC s is associated with financial reporting practices.