The Impact of Eliminating the 20-F Reconciliation on the Cost of Debt: An Exploratory Study
Journal of International Accounting Research Forthcoming
Posted: 7 Feb 2019
Date Written: January 24, 2019
In 2007, the U.S. Securities and Exchange Commission voted to eliminate the 20F reconciliation requirement for foreign issuers listing their stocks or bonds in the U.S. capital markets and preparing their financial statements under International Financial Reporting Standards (IFRS). Distinct from prior research focusing on the equity market, we investigate the impact of eliminating the 20-F reconciliation on the cost of debt in the U.S. listed foreign bond market. Employing a difference-in-differences approach, we document that bond yield spread increases for foreign IFRS bond issuers after the elimination of 20-F reconciliation. The results suggest that bondholders, on average, view the elimination of 20-F reconciliation as an information loss. Cross-sectional analyses reveal that the positive association between the elimination of 20-F reconciliation and bond yield spread is more pronounced for firms with greater stock return volatility, lower institutional ownership, weaker reporting incentives, and higher country-level investor protection.
Keywords: 20-F reconciliation; cost of debt; U.S. cross listing; IFRS; U.S. GAAP
JEL Classification: M41; G15; G18
Suggested Citation: Suggested Citation