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International evidence on the impact of adopting English as an external reporting language

Author

Listed:
  • Thomas Jeanjean

    (ESSEC Business School)

  • Hervé Stolowy

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Michael Erkens

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Teri Lombardi Yohn

    (Kelley School of Business - Indiana University [Bloomington] - Indiana University System)

Abstract

This study investigates the economic consequences of non-English-speaking companies adopting English as an external reporting language. We examine a sample of European companies that initiate the voluntary issuance of an annual report in English in addition to the local language annual report. To control for self-selection, we use a difference-in-differences design with a propensity score matched control sample. We find that adoption of English as an external reporting language is associated with increased foreign ownership, decreased information asymmetry, and increased analyst following. We also find that these benefits are not conditional on the use of IFRS for financial reporting. Our findings hold if we run a number of robustness checks to control for correlated events (creation of an investor relations service, provision of conference calls, and/or changes in management). These results are consistent with the language used in the annual report acting as a barrier to investment for some investors and with annual reports issued in English reducing investors' information processing costs.

Suggested Citation

  • Thomas Jeanjean & Hervé Stolowy & Michael Erkens & Teri Lombardi Yohn, 2015. "International evidence on the impact of adopting English as an external reporting language," Post-Print hal-01147676, HAL.
    • Handle: RePEc:hal:journl:hal-01147676
    DOI: 10.1057/jibs.2014.33
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    Cited by:

    1. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    2. Drago, Carlo & Ginesti, Gianluca & Pongelli, Claudia & Sciascia, Salvatore, 2018. "Reporting strategies: What makes family firms beat around the bush? Family-related antecedents of annual report readability," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 142-150.
    3. Emmanuel T. De George & Xi Li & Lakshmanan Shivakumar, 2016. "A review of the IFRS adoption literature," Review of Accounting Studies, Springer, vol. 21(3), pages 898-1004, September.
    4. Orazalin, Nurlan & Mahmood, Monowar, 2018. "Economic, environmental, and social performance indicators of sustainability reporting: Evidence from the Russian oil and gas industry," Energy Policy, Elsevier, vol. 121(C), pages 70-79.
    5. Antioco, Michael & Coussement, Kristof & Fletcher-Chen, Chavi Chi-Yun & Prange, Christiane, 2023. "What's in a word? Adopting a linguistic-style analysis of western MNCs’ global press releases," Journal of World Business, Elsevier, vol. 58(2).
    6. Golesorkhi, Sougand & Mersland, Roy & Piekkari, Rebecca & Pishchulov, Grigory & Randøy, Trond, 2019. "The effect of language use on the financial performance of microfinance banks: Evidence from cross-border activities in 74 countries," Journal of World Business, Elsevier, vol. 54(3), pages 213-229.
    7. Vismaya Gangadharan & Lakshmi Padmakumari, 2024. "Fogging the firm performance: an empirical examination of the annual report readability in India," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 211-226, June.
    8. Moreno, Alonso, 2024. "Impression management in bilingual corporate reporting: An analysis of textual characteristics in Spanish and English," Research in International Business and Finance, Elsevier, vol. 70(PA).
    9. Jie Peng & Boluo Liu & Jing Wu & Xiangang Xin, 2024. "Financial statement comparability and global supply chain relations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(3), pages 342-360, April.
    10. Fuentelsaz, Lucio & Garrido, Elisabet & González, Minerva, 2020. "Ownership in cross-border acquisitions and entry timing of the target firm," Journal of World Business, Elsevier, vol. 55(2).

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