This paper uses a sample of more than 2,500 firms from 27 countries to investigate the relation among ownership structure, analyst following, investor protection, and valuation. We find that analysts are less likely to follow firms with potential incentives to withhold or manipulate information, such as when the family/management group is the largest control rights blockholder. Furthermore, this relation is stronger for firms from low‐shareholder‐protection countries. Using valuation regressions that take into account potential endogeneity between analyst following and firm value, we find a positive valuation effect when analysts cover firms that have both potentially poor internal governance and weak country‐level external governance. Overall, our findings suggest that corporate governance plays an important role in analysts' willingness to follow firms and that increased analyst following is associated with higher valuations, particularly for firms likely to face governance problems.

We examine the relation between auditor characteristics (quality and tenure) and the cost of debt financing. Consistent with the hypothesis that audit characteristics are important to the capital markets, we find that (1) auditor quality and tenure are negatively and significantly related to the cost of debt financing, (2) the relation between auditor characteristics and the cost of debt is most pronounced in firms with debt that is noninvestment grade, and (3) both the insurance and information role of audits are economically significant to the cost of debt. Overall, our results suggest that, through their dual roles of providing information and insurance, auditor quality and tenure matter to capital market participants.

We study the economic consequences of a recent Securities and Exchange Commission securities regulation change that grants foreign firms trading on the U.S. over‐the‐counter (OTC) market an automatic exemption from the reporting requirements of the 1934 Securities Act. We document that the number of voluntary (sponsored) OTC cross‐listings did not increase following the regulation change, suggesting that it did not achieve its intended purpose of increasing voluntary OTC cross‐listings through a reduction in compliance costs. We do find that the design of the regulation allowed financial intermediaries to create an unprecedented number of involuntary (unsponsored) OTC ADRs: 1,700 unsponsored ADR programs for 920 firms were created for companies that had previously chosen not to cross‐list in the United States. Our difference‐in‐differences analysis based on a matched sample approach documents that foreign firms forced into the U.S. capital markets experience a significant decrease in firm value, and we further show that the decrease in firm value is related to an increase in U.S. litigation risk. We also find that depositary banks’ propensity to involuntarily cross‐list firms is positively related to banks’ expected fee revenue, and that banks chose firms that incur high costs when involuntarily cross‐listed. Our results provide evidence that securities regulation can be exploited for private gain and result in costly unintended consequences.

This paper investigates the relation between cross listing in the United States and the information environment of non‐U.S. firms. We find that firms that cross list on U.S. exchanges have greater analyst coverage and increased forecast accuracy than firms that are not cross listed. A time‐series analysis shows that a change in analyst coverage and forecast accuracy occurs around cross listing. We also document that firms that have more analyst coverage and higher forecast accuracy have higher valuations. Furthermore, the change in firm value around cross listing is correlated with changes in analyst following and forecast accuracy, suggesting that cross listing enhances firm value through its effect on the firm's information environment. Our findings support the hypothesis that cross‐listed firms have better information environments, which are associated with higher market valuations.

This study investigates (1) whether misreporting by corporate executives impacts unethical decision‐making by non‐peers in unrelated reporting tasks, and (2) whether observing various forms of punishment for corporate misreporting deters this spillover effect. Specifically, we examine the deterrent effects of two common forms of punishment (fines or imprisonment) and a novel form of punishment (public shaming). Across two experiments, we find that participants are more likely to misreport performance when exposed to media reports about executives engaging in financial misreporting. This evidence is consistent with executive misreporting leading to unethical decision‐making among non‐peer observers. We also find that participant misreporting is reduced when the media reports the punishments levied against those executives. In further mediation tests, our findings suggest observed punishments for corporate misconduct can influence perceptions of injunctive norms and potentially mitigate spillover in unethical behavior.