Why Do Cross-Listed Firms in the U.S. Voluntarily Release Management Earnings Forecast?

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Abstract
This paper investigates the incentives of management earnings forecasts released by foreign firms listing in the U.S. We document that legal institutions, as measured by legal origin, investor protection and judicial efficiency, are positively associated with the likelihood of forecast occurrence. In addition, cross-listed firms are more likely to release forecast disclosures when they list on major U.S. stock exchanges, and have higher proportion of foreign sales. Further, we indicate that the likelihood of forecasts is positively associated with institutional ownership, but negatively associated with cash flow rights controlled by the largest shareholders. This paper extends the literature on reputational bonding mechanism and the theory of international corporate governance convergence.

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