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RAF 5,2

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firms (Huijgen and Lubberink, 2001; Lang et al., 2003). Lang et al. (2003) analyze the characteristics of local generally accepted accounting principles (GAAP) earnings for firms cross-listing on US exchanges relative to a matched sample of foreign firms currently not cross-listing in the USA. They investigate whether US listing is associated with differences in accounting data reported in local markets. They find that ‘‘cross-listed firms differ in terms of the time-series properties of earnings and accruals, and the degree of association between accounting data and share prices. Cross-listed firms appear to be less aggressive in terms of earnings management and report accounting data that are more conservative, take account of bad news in a more timely manner, and are more strongly associated with share price’’ ( p. 363).

Our next two hypotheses are:

H4. The accounting earnings disclosed by internationally financed companies are more timely and conservative than those published by domestically financed ones.

H5. The trend towards more timeliness and conservatism in accounting earnings is clearer in internationally financed companies than domestically financed ones.

Big Five audited versus domestically audited firms. Another possible factor behind the increasing timeliness and conservatism of accounting earnings among European companies relates to the quality of auditing. In a study of the relationship between audit quality and earnings management, the then Big Six auditors were assumed to have higher quality than non-Big Six auditors (Becker et al., 1998). Basu (2001) suggests globalization of auditing has resulted in the extension of common-law country auditing practices to code law countries. Another study found that Big Six auditors encourage more conservative financial reporting than non-Big Six auditors (Ruddock et al., 2002). Since Big Five accounting firms audit most large non-US firms, it is possible that they enforce greater asymmetric conservatism in France due to their reputation concerns.

We thus propose two hypotheses concerning the audit firms engaged by French companies:

H6. The accounting earnings disclosed by Big Five audited companies are more timely and conservative than those published by domestically audited ones.

H7. The trend towards more timeliness and conservatism in accounting earnings is clearer in Big Five audited companies than domestically audited ones.

4. Data and variables Sample The sample used for our statistical tests is based on French listed companies from the Worldscope database (Thomson One Banker – Analytics), which contains a total of 1,420 such companies. Since we study trends over the 10-year observation period 1990- 1999, sample constancy is vital; i.e. the observed changes must concern the same sample companies throughout the period. We therefore eliminated all companies for which any data was missing during these ten years. The final sample contains 267 companies, resulting 2,670 firm-year observations from 1990 to 1999.

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