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International Business Institute

International Finance and Accounting Article and Book Chapter Abstracts

International Finance and Accounting Article and Book Chapter Abstracts

A Bibliography of Ivey-authored International Finance and Accounting-Related Publications
As of September 14, 2016

Refereed Articles

Busaba, W.Y., Guo, L., Sun, Z., Yu, T., 2015, "The Dark Side of Cross-Listing: A New Perspective from China", Journal of Banking & Finance, 57: 1 - 16.

Keywords : Cross-listing; Agency problem; Tunneling.

Abstract : An interesting phenomenon for Chinese firms that list their stock both in China and abroad is that the overwhelming majority had gone public, and listed, abroad first. We find that when these companies return to China to issue stock and list, they experience poorer post-issuance stock and operating performance in comparison to purely domestic issuers. Also, they raise more funds relative to their sales, leave less money on the table for investors, and incur lower direct flotation costs. Among returning firms, those which raise higher proceeds relative to sales experience poorer long-run stock performance and lower Tobin’s q post issuance. Our results offer a new perspective on cross-listing, which we term “dressing-up-for-premium”. Firms from less-developed markets take advantage of the enhanced visibility and prestige associated with the foreign listing to issue shares domestically at inflated prices and favorable terms, and to raise greater proceeds than they can efficiently use.


King, M.R., 2015, "Political bargaining and multinational bank bailouts", Journal of International Business Studies, 46(2): 206 - 222.

Keywords : business/government interaction and relations; political strategies; bargaining; financial crisis; banking and finance; markets and institutions.

Abstract : This article examines the role of political bargaining and state institutions in explaining variation in state support to multinational banks (MNBs). International business theory predicts that multinational enterprises will engage in political activities to gain a competitive advantage over rivals. I hypothesize that MNBs with greater bargaining power and favorable institutions received state capital injections on more attractive terms than foreign rivals. I test this hypothesis by studying the October 2008 state recapitalizations of MNBs by the UK, France, Germany, the United States, and Switzerland. I measure the relative attractiveness of state bailouts by comparing the bank stock price reactions when the bailouts were announced. The stock prices of MNBs receiving more favorable state support outperformed foreign rivals, reflecting the competitive advantage gained. States imposed more punitive terms on banks when political and legal institutions were more favorable and MNBs were unable to form a coalition. States that are highly dependent on banks and where state bailouts were large relative to GDP were also more punitive. These findings highlight the importance of political behavior as a tool of strategy, and the need for coordination on banking policy across states to reduce moral hazard.


Strike, V., Berrone, P., Sapp, S., Congiu, L., 2015, "A socioemotional wealth approach to CEO career horizons in family firms", Journal of Management Studies, 52(4): 555 - 583.

Keywords : CEO career horizon; Socioemotional wealth; Family CEO; Family firms.

Abstract : This paper challenges the predominant view that as CEOs near retirement, they forgo risky long-term strategic choices and instead focus on decisions that enhance their own short-term self-interests. Drawing on the socioemotional wealth (SEW) literature, we argue that unlike near-retirement CEOs in widely held firms, near-retirement CEOs in family firms are more concerned about transgenerational control and the legacy that they pass on to future generations. We further contend that the priority of SEW dimensions can change within family firms depending on the CEO's time to retirement. Consequently, near-retirement CEOs in family firms differ from their counterparts in nonfamily firms in that they are willing to continue to engage in international acquisitions as they approach retirement, despite the potential short-term risks. We further hypothesize that this effect depends on whether the CEO is a family member, whether the CEO is succeeded by another family member, and whether the CEO is the founder. In analyzing 3,432 family and nonfamily firm-year observations from the S&P 500 for the period between 1997 and 2009, we find support for our hypotheses. Subsequent analyses indicate that near retirement, family CEOs acquire larger and culturally closer targets than their nonfamily counterparts. Our paper confirms the need to more fully consider the characteristics of owners and managers in analyses of the CEO career horizon problem.


Van Essen, M., Strike, V., Camey, M., Sapp, S., 2015, "The Resilient Family Firm: Stakeholder Outcomes and Institutional Effects", Corporate Governance-An International Review, 23(3): 167 - 183.

Abstract : Research Question/Issue: Our study seeks to explain the relationship between publicly listed family-controlled firms (FCFs) and investor and employee outcomes before and during the global financial crisis. Theoretically, we develop hypotheses suggesting that FCF resilience is beneficial to both investor and employees. Employing a large firm-level data set of 2,949 firms across 27 European countries, we test the hypotheses that FCFs' long-term orientation makes them resilient to the effects of economic shocks. In addition, using hierarchical linear modeling we evaluate family firm investor and employee outcomes, and the moderating impact of legal institutions protecting minority investors and employees. Research Findings/Insights: We find that FCFs financially outperform non-FCFs during the financial crisis, beginning in 2007 and reaching its lowest point in 2009, but show no significant differences during the stable-growth period between 2004 and 2006. We evaluate two employee outcomes: downsizing and wage decreases. We find that FCFs are less likely to downsize their workforce or cut wages in both pre-crisis and crisis conditions. Based upon hypotheses founded in the comparative capitalisms logic, we find significant institutional effects that are contrary to our predictions. Our findings suggest that investors and employees of FCFs achieve more favorable outcomes for their interests when the rules pertaining to investor protection and their enforcement are poorly developed. Theoretical/Academic Implications: We contribute to the emerging literature on the institution-based view of comparative corporate governance by demonstrating that family-controlled firms' stakeholder outcomes are contingent upon legal protection for employees and investors under contrasting economic circumstances. Practitioner/Policy Implications: Family owners, employees and minority investors should consider both firm-level and country-level governance institutions when investing in different countries, especially in times of economic crisis as jurisdiction-level institutions and firm ownership choices produce variable outcomes for different stakeholders in both crisis and non-crisis conditions.


Foerster, S.R., Fogler, L., Sapp, S., 2014, "Northern Exposure: How Canadian Micro-Cap Stock Investments Can Benefit Investors", Journal of Investment Consulting, 15(1): 36 - 50.

Abstract : Micro-cap stocks, a subset of small stocks, have the potential to provide additional diversification benefits and increased returns to investors. The ways that micro-cap stocks can contribute to investors’ actual portfolios have not been rigorously investigated. In this study, we examine micro-cap stocks in Canada and consider investability constraints and transaction costs that are overlooked in most other size-effect studies. We find that micro-cap stocks in Canada have relatively high returns and a low correlation to large stocks in Canada, the United States, and other developed markets. We conclude that these findings demonstrate that Canadian micro-cap stocks appear to represent a unique asset class and that investing in this unique asset class can improve the risk-return characteristics for global investors’ overall portfolios. We therefore suggest that global investors consider adding Canadian micro-cap stocks to their portfolios.


Zeff, S., Radcliffe, V.S., Gunz, S., 2014, "Accounting and Auditing Activities of the Ontario Securities Commission, 1960s to 2008: The Role and Performance of the First Five Chief Accountants - Part 3: The Fifth Chief Accountant, 1996-2008", Accounting Perspectives, 13(4): 223 - 252.

Abstract : We present Part 3 of a historical review and analysis of the role played by the Ontario Securities Commission (OSC) in accounting and auditing from the 1960s onwards. Part 1 dealt with the period from the 1960s to 1985. Part 2 reviewed the work of the first four Chief Accountants, from 1986 to 1996. This third and final part reviews the work of the fifth Chief Accountant, John A. Carchrae, from 1996 to 2008. It began with the reorganization of the OSC and the reassignment of functions. The Chief Accountant position was now that of a permanent employee, albeit still as head of a very small department. The second part of Carchrae’s tenure was dominated by the need to respond to the financial crises of the early 21st century with extensive regulatory change as well as addressing the shift to international accounting standards in Canada.


King, M.R., Osler, C., Rime, D., 2013, "The Market Microstructure Approach to Foreign Exchange: Looking Back and Looking Forward", Journal of International Money and Finance, 38: 95 - 119.

Keywords : Exchange rates; Market microstructure; Order flow; Information; Liquidity; Electronic trading.

Abstract : Research on foreign exchange market microstructure stresses the importance of order flow, heterogeneity among agents, and private information as crucial determinants of short-run exchange rate dynamics. Microstructure researchers have produced empirically-driven models that fit the data surprisingly well. But FX markets are evolving rapidly in response to new electronic trading technologies. Transparency has risen, trading costs have tumbled, and transaction speed has accelerated as new players have entered the market and existing players have modified their behavior. These changes will have profound effects on exchange rate dynamics. Looking forward, we highlight fundamental yet unanswered questions on the nature of private information, the impact on market liquidity, and the changing process of price discovery. We also outline potential microstructure explanations for long-standing exchange rate puzzles.


Shi, Y.N., Magnan, M., Kim, J-B., 2012, "Do Countries Matter for Voluntary Disclosure? Evidence from Cross-listed Firms in the U.S.", Journal of International Business Studies, 43(2): 143 - 165.

Keywords : Cross-listing; Voluntary disclosure; Management earnings forecast; Institutional theory; Agency theory; Reputational bonding theory.

Abstract : This paper explores the likelihood and consequences of voluntary disclosure (proxied by management earnings forecasts) for a sample of 1,005 cross-listed firms in the U.S. from 40 countries over the period of 1996–2005. Our study is grounded in a three-tiered conceptual framework that relies on insights from and implications of institutional theory, agency theory, and bonding theory to explain the costs and benefits associated with voluntary disclosure. Consistent with institutional theory and agency theory, our results indicate that disclosure likelihood increases with the strength of cross-listed firms’ home country legal institutions, and is also influenced by U.S. listing type, product market internationalization, and ownership structure. Further, our results show that voluntarily committing to U.S. disclosure practice is associated with lower information asymmetry, which supports reputational bonding theory. Overall, our study provides a costs-and-benefits framework to understand voluntary disclosure practices in an international context. Our work also presents convincing evidence that home country institutions still matter when foreign firms migrate into the U.S. financial market, which highlights the importance of country-level institution development.


Athanassakos, G., Ackert, L.F., Naydenova, B., Tafkov, I., 2010, "Determinants of Investor Demand for Cross-Listed Firms", Financial Markets, Institutions & Instruments, 19(3): 245 - 267.

Keywords : Cross-listings; Trading volume; Visibility.

Abstract : By focusing on the decisions of investors to invest in cross-listed stocks, this paper presents new evidence on why we observe striking differences in the percentage of trade in foreign markets for cross-listed stocks. With a large sample of Toronto Stock Exchange (TSX) stocks cross-listed in the U.S. and Canada, we document the effect of investor recognition and risk characteristics on the distribution of trading volume. Firms that are more visible to American investors are traded more heavily in the U.S. At the same time, firms that offer diverse risk characteristics are attractive to Americans. While investors understand the benefits of international diversification, as they are attracted to stocks that are different (e.g., the stock of small firms with few assets in the U.S.), they also seek stocks that provide them with high returns.


King, M.R., Sarno, L., Sojli, E., 2010, "Timing Exchange Rates Using Order Flow: The Case of the Loonie", Journal of Banking & Finance, 34(12): 2917 - 2928.

Abstract : This paper examines the relation between the Canadian dollar/US dollar (CAD) exchange rate and foreign exchange order flow employing a novel data set on CAD order flow over the period 1994–2005. We investigate empirically the predictive information content and the determinants of order flow. The results suggest that order flow has strong out-of-sample predictive power for CAD returns, yielding significant market timing ability and tangible economic gains in a stylized dynamic asset allocation context. In terms of its determinants, order flow appears to reflect not only the menu of macroeconomic variables typically suggested in the literature but is also closely related to commodity price fluctuations, as expected from a ‘commodity currency’.


Lo, I., Sapp, S., 2010, "Order aggressiveness and quantity: How are they determined in a limit order market?", Journal of International Financial Markets, Institutions & Money, 20(3): 213 - 237.

Keywords : International finance; Market microstructure; Foreign exchange; Limit order book.

Abstract : Dealers trading in a limit order market must choose both the order aggressiveness and the quantity for their orders. Since little research has considered how dealers make this trade-off, we empirically investigate how dealers jointly make these decisions in the foreign exchange market using a unique simultaneous equations model. Our model uses an ordered probit model to account for the discrete nature of order aggressiveness and a censored regression model to capture the quantity decision recognizing the clustering of orders at the smallest available quantity, $1 million. Using two currency pairs with very different trading characteristics, we find evidence of a trade-off between order aggressiveness and quantity. We also find a significant role being played by factors related to the levels of information asymmetry and liquidity in the dealers’ choices of both the order aggressiveness and quantity.


Kaul, A., Sapp, S., 2009, "Trading Activity, Dealer Concentration and Foreign Exchange Market Quality", Journal of Banking & Finance, 33(1): 2122 - 2131.

Keywords : Market quality; Market microstructure; Foreign exchange.

Abstract : We study the relation between foreign exchange market quality and both trading activity and dealer concentration by considering two currency pairs with significant differences along both dimensions - the Euro-US dollar and Canadian dollar-US dollar. A variance ratio test reveals over-reaction in currency prices, but that this is smallest when trading activity is high and dealer concentration at its peak. A GARCH model shows that over-reaction declines as trading activity and dealer concentration increase, with the results being stronger for the Euro. Our results confirm that trading activity is an important determinant of market quality, but also point to a significant role for dealer concentration.


Casabe, H.D., Radcliffe, V.S., 2008, "Learning from Argentina's Greatest Fiscal Crisis", Journal of Public Budgeting, Accounting and Financial Management, 20(2): 212 - 216.

Abstract : The case of the Argentinian fiscal crisis provides an opportunity to consider the potentially grave consequences of sustained trade and fiscal deficits. Argentina had pegged the value of its currency at an artificially high level, leading to constant international trade deficits. In addition government spending grew substantially but was not matched with corresponding increases in revenue, resulting in sustained fiscal deficits. Crisis erupted in 2002 as GDP fell by 20% and inflation reached 70%. 54% of the population fell into poverty. Currency devaluation, renegotiation of debt, and emergency fiscal measures were undertaken to stabilize the situation. The Argentinian experience shows that substantial trade and fiscal deficits are not ultimately sustainable, and that potentially painful measures must be taken to correct them before economic crisis results.


Lo, I., Sapp, S., 2008, "The Submission of Limit Orders or Market Orders: The Role of Timing and Information in the Reuters D2000-2 System", Journal of International Money and Finance, 27(7): 1056 - 1073.

Keywords : Market microstructure; Limit order; Market order; Liquidity; Duration.

Abstract : Recent work in the market microstructure literature suggests that the speed with which orders arrive in the market impacts traders' order submission decisions. In this study we use an asymmetric autoregressive conditional duration (ACD) model to empirically investigate the influence on the submission of limit and market orders of changes in the time between the past submissions of different types of orders, changes in the slope of the limit order book, and changes in price uncertainty. We find that the expected time between the arrivals of successive orders in the foreign exchange market depends on the previous type of order submitted and the slope on both sides of the order book. Price uncertainty (volatility) plays a secondary role after accounting for the impact of changes in the slope of the order book. Lastly, we find that there are fundamental changes in the level of information contained in the submission of orders at the opening and closing of markets.


Martin, P., Mezon, T., Forrestal, T., Labelle, R., Radcliffe, V.S., Gaa, J., 2008, "International Financial Reporting Standards are Coming: Are You Ready?", Accounting Perspectives, 7(1): 41 - 56.

Abstract : In June 2006, shortly after the Accounting Standards Board (AcSB) announced that Canada would be adopting International Financial Reporting Standards (IFRS), the Canadian Academic Accounting Association sponsored a session entitled 'International Financial Reporting Standards Are Coming: Are You Ready?' and invited presentations on the topic by representatives of the AcSB, practitioners, and academics with diverse teaching and research perspectives. The session included an overview of the anticipated challenges arising from the AcSB's strategy for the adoption of IFRS in Canada for the business community and the implications for accounting education and research. This paper summarizes the presentations at the forum.


Peng, G., Beamish, P.W., 2008, "The Effect of National Corporate Responsibility Environment on Japanese Foreign Direct Investment", Journal of Business Ethics, 80(4): 677 - 695.

Keywords : Corporate social responsibility; Corruption; Development stage; Japanese foreign direct investment; National corporate responsibility; Institutions; Emerging markets.

Abstract : We examine the relationship between Japanese foreign direct investment (FDI) and the national corporate responsibility (NCR) environment in host countries using corporate social responsibility and international business theories. Based on data from the Japanese Government's Ministry of Finance, AccountAbility, and other sources, we find that the level of NCR has a positive relationship with FDI inflow for developing countries. The relationship for developed countries is negative but not statistically significant. The underlying host country development stage moderates the relationship. The results can help deepen understanding of FDI behaviors and have practical implications for host countries in terms of attracting FDI.


Charlebois, M., Sapp, S., 2007, "Temporal Patterns in Foreign Exchange Returns and Options", Journal of Money, Credit and Banking, 39(2/3): 443 - 470.

Keywords : Technical analysis; Exchange rates; Derivatives; International.

Abstract : Although the foreign exchange market is believed to be one of the most efficient financial markets in the world, there is significant evidence that technical analysis is profitable in this market. In this study we investigate the ability of information from the options market to supplement the commonly used information on past prices to predict temporal patterns in foreign exchange returns. We find that information from the options market improves the performance of technical trading strategies. Strategies using information from at-the-money options were more consistently profitable than the most commonly used strategies based on only historical spot exchange rates (past prices). Our results hold out-of-sample as well as in the late nineties, a period when few sources of information have proven reliable. Consequently options appear to contain valuable information regarding future spot exchange rate movements.


King, M.R., Mittoo, U., 2007, "What Companies Need to Know About International Cross-Listing", Journal of Applied Corporate Finance, 19(4): 2 - 16.

Abstract : This article addresses four questions about cross-listing by non-U.S. companies on a U.S. stock exchange: Why do companies cross-list? Does a U.S. listing increase firm value? If so, what are the sources of the increased valuation? And finally, how has the Sarbanes-Oxley Act (SOX) affected the value of a U.S. listing? Both managerial surveys and academic research show that companies list in the U.S. to increase visibility and share liquidity, to broaden their shareholder base, to gain access to cheaper financing and reduce the cost of capital, and, in some cases, to implement a global business strategy. Foreign companies also typically cross-list after periods of strong market performance and experience a positive valuation effect around the time of listing, but then underperform the market in the period after the cross-listing. On average, cross-listed companies exhibit higher valuations than their home-market peers, but with significant variation based on firm characteristics: The valuation premiums are larger for smaller companies with higher past sales growth, higher ROAs, and lower financial leverage. In the long run, the companies that show a permanent increase in valuation are those that succeed in expanding their U.S. shareholder base and improving their levels of shareholder protection. Finally, the evidence suggests that SOX, while perhaps deterring some would-be overseas listings, has not seriously eroded the net benefits of a U.S. listing.


Foerster, S.R., Sapp, S., 2005, "Valuation of Financial Versus Non-Financial Firms: A Global Perspective", Journal of International Financial Markets, Institutions & Money, 15(1): 1 - 20.

Keywords : Interest rates; Financial institutions; Asset pricing; Empirical testing.

Abstract : It is common practice in many empirical studies in finance to exclude financial services firms from the samples used in different stages of the analysis. In this paper we analyze the impact of this exclusion on common asset pricing tests by comparing the results using data both including and excluding financial sector firms in the countries with the largest financial sectors (the G7 countries plus the Netherlands and Switzerland) over the 1973 to 2000 period. We find that excluding financial service firms from empirical asset pricing tests can impact the corresponding inferences. It may influence both the identification of the number of risk factors found to be significant and the corresponding betas. For example, the estimated coefficients on some factors are significantly negative for the financials and significantly positive for many of the non-financials. We also show that, using a Fama-MacBeth (1973) test procedure, we fail to reject some models when financial firms are included in tests, but reject the same models when financials are excluded. Consequently we suggest researchers recognize the possible impact of the industry composition of the portfolios used in empirical studies.


Sapp, S., 2004, "Are All Central Bank Interventions Created Equal? An Empirical Investigation", Journal of Banking & Finance, 28(3): 443 - 474.

Keywords : Foreign exchange; Central Bank intervention; Technical analysis.

Abstract : This study investigates the relationship between Central Bank interventions and technical trading rule profitability in the spot foreign exchange market. Because interventions are not necessarily exogenous events, we analyze the relationships between interventions by the G-3 Central Banks, financial market conditions, changes in monetary policy and technical trading profitability. By considering announced, unannounced, unilateral and coordinated interventions separately, we provide more insight into the interrelationships between these factors than previous studies. We find that the level of technical trading profits and market uncertainty increase preceding and remain high during interventions, especially announced and coordinated, but decrease afterward. A preliminary investigation of the possible role of a time-varying risk premium around interventions cannot be rejected.


King, M.R., 2003, "Effective Foreign Exchange Intervention: Matching Strategies with Objectives", International Finance, 6(2): 249 - 272.

Abstract : Foreign exchange intervention may be undertaken to meet a range of objectives. Empirical work conducted to test the effectiveness of intervention does not adequately address how these objectives may vary over time. As a result, these studies overwhelmingly find that foreign exchange intervention has only a transitory effect on the level or volatility of the exchange rate. These studies suggest strategies that may increase the short-term effectiveness of intervention. Intervention to pursue policy objectives should be announced, supported by macro economic policy, coordinated with other monetary authorities, and conducted ‘against the wind’. Intervention targeting tactical objectives should be conducted secretly, ‘with the wind’, in large size and timed for maximum impact.


King, M.R., Sinclair, T.J., 2003, "Private Actors and Public Policy: A Requiem for the New Basel Capital Accord", International Political Science Review, 24(3): 345 - 362.

Abstract : After the Asian crisis of 1997-98, policy-makers invested much energy in designing a new international financial architecture. However, many of the policy proposals that have emerged from think tanks and the multilateral agencies have proven unworkable or politically unpalatable. The debate focuses on state-led initiatives. But the assumption that public policy is by definition an output of public institutions is difficult to sustain in an era of global change. This article considers specialized forms of intelligence gathering and judgment determination which seem increasingly important as sources of governance in this era of financial market volatility: Moody's Investors Service and Standard & Poor's, the major bond rating agencies. More specifically, we examine a proposal of the Basel Committee on Banking Supervision to reform the existing capital adequacy framework by incorporating banks' own internal ratings and external bond ratings from the rating agencies, in order to calculate bank risk-weighted capital requirements. The article identifies a series of negative implications from the use of private rating agencies as a substitute for state-based regulation, premised on the organizational incentives that shape the ratings industry. Cementing these organizational incentives into the emerging financial architecture will, we argue, lead to negative social and economic consequences.


Sapp, S., 2002, "Price Leadership in the Spot Foreign Exchange Market", Journal of Financial and Quantitative Analysis, 37(3): 425 - 448.

Keywords : Studies; Foreign exchange rates; Banks; Statistical analysis.

Abstract : This study empirically investigates how new information is incorporated into intra-daily DM-$US quotes, and finds evidence that certain dealers consistently incorporate new information into their quotes before others and that their behavior is influenced by market conditions. In general, Chemical Bank's quotes are the first to contain new information. However, in the periods of uncertainty around central bank interventions, evidence suggests Deutsche Bank is the price leader and its quotes are influenced by information and inventory considerations.


King, M.R., 2001, "Who Triggered the Asian Financial Crisis?", Review of International Political Economy, 8(3): 438 - 466.

Abstract : The Asian financial crisis was triggered by Japanese commercial banks who reduced their exposure to Asia in response to emerging troubles in Thailand and South Korea. Japanese banks had been severely weakened by the collapse of the real estate and stock market bubble in Japan in 1990. As the largest lenders in Asia and the key creditor in Thailand, Japanese banks signalled the change in sentiment to other foreign commercial banks who also withdrew their loans. These capital outflows triggered a devaluation in Thailand in mid-1997, but not in Korea until late 1997, due to the different exchange rate regimes in these countries. Despite the devaluation and outflow of bank loans, bond investors continued to provide capital to Asian borrowers until November 1997, at spreads which did not reflect the risks involved. By 1998, foreign equity investors were returning to these markets in search of bargains. Rather than rushing to the exits in a herd-like fashion, institutional investors made investment decisions which created off-setting private capital flows. This analysis suggests that more attention should be paid to the incentives facing institutional investors and the design of domestic institutions, rather than to the need for a new financial architecture.


Foerster, S.R., Karolyi, G.A., 2000, "The Long Run Performance of Global Equity Offerings", Journal of Financial and Quantitative Analysis, 35(4): 499 - 528.

Keywords : Equity capital; American depositary receipts; Rates of return; International finance; Long term; Capital markets; Studies.

Abstract : We investigate the long-run return performance of non-US firms that raise equity capital in U.S. markets. Overall, between 1982 and 1996, our sample of 333 global equity offerings with U.S. depositary receipt (ADR) tranches from 35 countries in Asia, Latin America, and Europe under-perform local market benchmarks of comparable firms by 8%-15% over the three years following issuance. We show that differences in long-run returns are related to the scope and magnitude of investment barriers that induce segmentation of capital markets around the world. While companies from markets with significant investment barriers for foreigners that issue equity on major U.S. exchanges outperform their benchmarks, those from segmented markets that issue equity in the U.S. by way of Rule 144A private placements significantly under-perform. We also show that inter-market competition for order flow in the post issuance pursued affects long-run performance. Post-issuance buy-and-hold abnormal returns are most significantly and positively related to the offering's ability to generate a larger share of U.S. trading volume.


Foerster, S.R., Karolyi, G.A., 1999, "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence From Foreign Stock Listings in the United States", Journal of Finance, 54(3): 981 - 1013.

Keywords : Cross-listing; ADR; Share price.

Abstract : Non-U.S. firms cross-listing shares on U.S. exchanges as American Depositary Receipts earn cumulative abnormal returns of 19 percent during the year before listing, and an additional 1.20 percent during the listing week, but incur a loss of 14 percent during the year following listing. We show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing. Our tests provide support for the market segmentation hypothesis and Merton's (1987) investor recognition hypothesis.


Foerster, S.R., Karolyi, G.A., 1998, "Multimarket Trading and Liquidity: A Transaction Data Analysis of Canada-U.S. Interlistings", Journal of International Financial Markets, Institutions & Money, 8(3-4): 393 - 412.

Keywords : Interlisting; Liquidity; International financial markets.

Abstract : We use transaction data for Toronto Stock Exchange (TSE) listed stocks to examine the impact on trading costs of the decision to interlist on a US exchange. We measure trading costs using both `posted' bid-ask spreads and `effective' bid-ask spreads that measure actual transaction prices relative to standing bid-ask quotes. After controlling for price level, trade size and trading volume effects, we find that overall posted and effective spreads in the domestic (TSE) market decrease subsequent to the interlisting. However, the decrease in trading costs is concentrated in those TSE stocks that experience a significant shift of total trading volume (TSE and US) to the US exchange after listing. We interpret this result in the context of theories of multimarket trading as a competitive response by TSE market makers to the additional presence of US market makers.


Foerster, S.R., Schmitz, J., 1997, "The Transmission of U.S. Election Cycles to International Stock Returns", Journal of International Business Studies, 28(1): 1 - 27.

Keywords : Stock returns; Capital gains; Election cycle.

Abstract : This paper examines the international pervasiveness and importance of the previously uncovered four-year U.S. election cycle whereby U.S. stock returns are significantly lower, and negative, in year 2 following U.S. presidential election relative to years 1, 3 and 4. All eighteen countries examined over the 1957 to 1996 time period possess lower local currency stock market capital gains returns in year 2 (-0.66%) relative to the average capital gains of years 1, 3 and 4 (11.68%). These predominately lower year 2 returns are shown to be robust in conditional expected return regressions which include both local macroeconomic variables as well as U.S. macroeconomic, fiscal and monetary policy variables. In addition, we find that the U.S. dollar trends to depreciate more in year 2 of the election cycle. We conclude that the U.S. election cycle variable is either proxying for information variables not included in our model, or the U.S. election cycle variable is capturing some form of U.S. and international market sentiment. That is, the U.S. election cycle may be an important nondiversifiable political factor in the determination of international conditional expected stock returns.


Foerster, S.R., Karolyi, G.A., 1993, "International Listings of Stocks: The Case of Canada and the U.S.", Journal of International Business Studies, 24(4): 763 - 784.

Keywords : Cross listing; Interlisting; Market segmentation.

Abstract : The globalization of financial markets has seen ever-increasing numbers of firms choosing to list their stocks on foreign exchanges. We examine whether the extent of economic and financial market integration (or segmentation) between a firm's home country and listing country influences stock price reaction by examining the case of two "similar" countries: the U.S. and Canada. During the 100 days before the week of interlisting in the U.S., (risk-adjusted) stock prices of Canadian firms rise (on average) by over 9.4%, rise by an additional 2% around the interlisting date, but follow with a corresponding drop of 9.7% in the 100 days after interlisting. We interpret this evidence to be consistent with the financial marketing segmentation between Canada and the U.S. However, a subsample of Canadian resources firms does not exhibit these stock price effects, suggesting industry-related factors may also be an important determinant of integration. We also find average trading volume in interlisted stocks more than doubles in the months following interlisting.


Non-Refereed Articles

Lanfranconi, C.P., Robertson, D.A., 2000, "The End of Pooling Envy", Ivey Business Journal, 64(6): 15 – 17.

Keywords : Poolings of Interest; Business Contributions; Advantages; Acquisitions and Mergers; Many industries; Comparative Analysis.

Abstract : Not all business combinations look the same, some look better than others. The lack of consistency in how business combinations are reported in financial statements is a concern of managers in any business that competes for capital and acquisitions. Canadian banks are just one industry group that has complained about competitive disadvantage relative to US competition resulting from Canada's more restrictive accounting standards for business combinations. The greater freedom of US companies to use pooling accounting has resulted in Canadian companies arguing for equal treatment so that they can compete in a level playing field in the acquisition market.


Foerster, S.R., Karolyi, G.A., Weiner, D.A., 1999, "Capital Rewards: The Lure of U.S. Exchanges", Ivey Business Journal, 63(4): 62 - 66.

Keywords : Guidelines, New stock market listings, International finance.

Abstract : Many Canadian firms, both established and emerging, have taken advantage of US investors' growing demand for non-US equities by listing on different US exchanges. It is widely believed that such a step improves an organization's ability to raise capital, broadens its shareholder base, increases the liquidity of its stock and raises its overall profile. Lessons that can enhance the chances of a successful listing in the US are: 1. Consider raising capital concurrent with the listing. 2. Effective communications are essential. 3. Use only recognized professionals. 4. Develop analyst coverage at the outset. 5. Be patient.


Lanfranconi, C.P., Robertson, D.A., 1998, "Financial Reporting: Purchasing Versus Pooling", Ivey Business Quarterly, 63(2): 12 - 13.

Keywords : Financial reporting, Acquisitions & mergers, Poolings of interest, Purchase accounting (acquisitions), Advantages, Disadvantages.

Abstract : Two recent events have been in the news: the merger of large Canadian companies and word "equals." In the last year, there has been significant merger and acquisition activity in Canada. What has received only passing attention is the accounting issue of pooling of interests that has been simmering for a few years in the boardrooms of the accounting profession. The issues of pooling versus accounting is highly unlikely to stir excitement in most. However, the issue is of sufficient importance to have both board of directors in the TransCanada/Nova merger receive an opinion from their auditors that pooling was appropriate.


Archibald, T.R., Lanfranconi, C.P., Robertson, D.A., 1997, "Who Do You Report To?", Ivey Business Quarterly, 62(2): 44 - 48.

Keywords : GAAP, Financial reporting, SEC regulations, Globalization, Securities markets, Shareholder relations.

Abstract : Canadian companies may have a choice in determining what standards they will use to report their financial statements; either Canadian or US GAAP. An organization might choose to adopt US accounting standards for several reasons. A company with interlisted equities is a likely candidate, as are those companies issuing debt in the US under SEC regulations. The movement by some Canadian companies to adopt US accounting standards is another manifestation of a move to a global economy.


Robertson, D.A., 1996, "Tax Talk", CA Magazine, 129(3): 39 - 40.

Keywords : Exposure drafts, Corporate income tax, Accounting policies, Accounting changes.

Abstract : The task force that recently created the exposure draft (ED) on corporate income taxes considered the recommendations contained in FAS 109, the US standard on corporate income tax, in developing the ED. It also considered alternative accounting treatments. However, given the importance of cross-border harmonization of accounting policies, it is not surprising that the ED's proposals are very similar to FAS 109. In the draft, there is a shift in focus from the income statement to the balance sheet, accompanied by a change in terminology. Two of the most important changes in the ED flow from this shift in focus. If adopted, the ED's proposals will affect every taxable entity that reports using Canadian GAAP.


Robertson, D.A., 1993, "Deferred But Not Forgotten", CA Magazine, 126(1): 54 - 60.

Keywords : Timing differences; Interperiod tax allocation; Financial reporting; Financial accounting standards; Deferred income taxes; Chartered accountants.

Abstract : The controversy over accounting for income taxes arises because taxable income is rarely the same as accounting income. It is as if there are 2 measurement systems, one determining accounting income using GAAP and the other determining taxable income based on the Income Tax Act. The differences between accounting income and taxable income can be classified as permanent differences and timing differences. The accounting issue is what recognition, if any, should be given to those differences. A temporary difference represents the discrepancy between the reported book value of an asset or a liability and its value for tax purposes. A permanent difference results from an item of revenue or expense that is recognized in one measurement system but is never included in the other measurement system. No clear consensus has emerged as to the appropriate method of measurement or the proper accounting of deferred taxes.



Foerster, S.R., 1998, "Finance and Money Market Cases", China, China Machine Press.

Keywords : Emerging markets; Finance and money market.

Abstract : This book contains 15 cases. 1. Midas Growth Fund: Economic Outlook 2. Jess Walton (A) 3. Kingsway Financial Services Inc. 4. The Bank Stock Investment Decision 5. Valuing Coca Cola Stock 6. ScotiaMcLeod Equity Derivatives Department 7. Cost Effectiveness Measurement Inc 8. Ontario Teachers' Pension Plan Board: The Asset Allocation Decision 9. Ontario Teachers' Pension Plan Board: Value at Risk 10. Ontario Teachers' Pension Plan Board: Hedging Foreign Currency Exposure 11. Southam Retirement Plan: Pension Fund Manager Selection 12. Note on Japanese Equity Markets 13. CIBC Japanese Equity Fund 14. Pegasus Pension Fund 15. Adam Bain and the Price Momentum Strategy


Sharp, D.J., 1998, "Managerial Accounting Cases", China, China Machine Press.

Keywords : Emerging markets; Managerial accounting.

Abstract : This book contains 5 cases. 1. Caribbean Internet Cafe 2. Stuart Daw 3. The Champagne Hotel 4. Mencotti Wine Co. 5. Minnova Inc. - Lac Shortt Mine



Sharp, D.J., Cohen, J., Pant, L., Freeman, R.E., 1997, International Accounting, in Werhane, P.H., Encyclopedia Dictionary of Business Ethics, Blackwell.

Abstract : (unavailable)


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