臺大管理論叢 NTU Management Review VOL.30 NO.2

The Effects of Relaxing the Reconciliation Requirement in Foreign Private Issuers’ SEC Filings on Earnings Management Strategies: IFRS Adopters versus U.S. GAAPAdopters 124 two earnings management mechanisms due to their relative costs. Third, our smaller sample may provide less powerful tests. We believe that the difference in our inferences is most likely due to the aforementioned reasons. However, we cannot rule out the possibility that lower power tests resulting from our smaller sample size contribute to our findings. Prior literature reports that the market attaches value to accrual-based earnings management, probably because the discretionary component increases the ability of earnings to reflect economic value (Subramanyam, 1996). Gunny (2010) also documents that real activities manipulation could be used as a way to signal superior future earnings (future firm value). Managers may use the joint signal — engaging in accrual-based earnings management and real activities manipulation — to convey future growth prospects. Prior studies suggest that U.S. cross-listings increase firm value (Doidge, Karolyi, and Stulz, 2004; Foerster and Karolyi, 1999; Karolyi, 2006; Lang et al., 2003). In accordance with the bonding hypothesis, non-U.S. firms cross-listed in the U.S. agree to link to the higher levels of disclosure and regulation required by U.S. exchanges (Coffee, 2002; Sridharan and Soonawalla, 2011). Specifically, to the extent that management incentives are well aligned with minority shareholder interests, managers provide investors with a credible assurance to not extract the private benefits of control from the firm, which leads to a higher investors’ valuation of earnings for firms that cross-list on the U.S. markets. Because that improved valuation is a major motivation for cross-listing in the U.S. and that our cross-listed IFRS firms may undertake accrual-based earnings management and real activities manipulation to enhance their firm value, these two reasons probably explain why our findings contrast with those of Doukakis (2014), who suggests that mandatory IFRS adoption for firms in European countries had no significant impact on both earnings management strategies. Our results have potential implications for future research. First, we document that simultaneous and sequential decision processes co-exist in firms adopting IFRS voluntarily prior to the regulatory change, depending on which earnings management approach is selected. It would be interesting to examine whether managers influence accounting output (e.g., to just meet an earning benchmark) more via a simultaneous or a sequential decision between accrual-based earnings management and real activities manipulation, which, in turn, may have different implications for equity valuation. Although there are quite a few dimensions to cross-listing, the elimination of the