This paper investigates the valuation effects of corporate international diversification by examining cross-border mergers and acquisitions of US acquirers over the period 1990–2000. We find that, on average, acquisitions of “fairly valued” foreign business units do not lead to value discounts. In contrast, unrelated cross-border acquisitions result in a significant diversification discount of about 24% after accounting for the valuation of foreign targets. Furthermore, significant wealth gains accrue to foreign target shareholders regardless of the type of acquisition. Overall, our results suggest that international diversification does not destroy value while industrial diversification leads to discounts even after controlling for the pre-acquisition value of the target.

We examine a primary outcome of corporate governance, namely, the ability to identify and terminate poorly performing CEOs, to test the effectiveness of U.S. investor protections in improving the corporate governance of cross‐listed firms. We find that firms from weak investor protection regimes that are cross‐listed on a major U.S. Exchange are more likely to terminate poorly performing CEOs than non‐cross‐listed firms. Cross‐listings on exchanges that do not require the adoption of stringent investor protections (OTC, private placements, and London listings) are not associated with a higher propensity to remove poorly performing CEOs.

Research on restatements has grown significantly in recent years. Many of these studies test hypotheses about the causes and consequences of intentional managerial misreporting but rely on restatement data (such as the GAO database) that contains both irregularities (intentional misstatements) and errors (unintentional misstatements). We argue that researchers can significantly enhance the power of tests related to restatements by distinguishing between errors and irregularities, particularly in recent periods when the relative frequency of error-related restatements is increasing. Based on prior research, the reading of numerous restatement announcements, and the guidance that boards receive from lawyers, auditors, and the SEC on how to respond to suspicions of deliberate misreporting, we propose a straightforward procedure for classifying restatements as either errors or irregularities. We show that most of the restatements we classify as irregularities are followed by fraud-related class action lawsuits as compared to only one lawsuit in the group of restatements classified as errors. As further validation of our proxy, we report that the market reaction to the restatement announcement for our irregularities sample (−14 percent) is also significantly more negative than it is for our errors sample (−2 percent). Finally, we demonstrate the importance of distinguishing errors from irregularities by showing the impact it has on inferences about the relation between restatements and CEO/CFO turnover over time.