Globalization of Stock Markets and Foreign Listing Requirements: Voluntary Disclosures by Continental European Companies
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INTRODUCTIONAND BACKGROUND
With the growingglobalizationof stock markets,includingthe listing of foreigncompanieson stock exchangesin other countriesthroughoutthe world,therehavebeen calls for greaterinternationalcoordinationof stock exchangedisclosurerequirementsand efforts expendedto encouragethis underthe auspicesof the FederationInternationaledes Boursesde Valeurs, the internationalassociationof stock exchanges[Choi and Mueller1984]. The advantagesareperceivedto be cost minimization,and, correspondingly, *G. K. Meekis AssociateProfessorof Accountingat OklahomaStateUniversity. At the time the researchfor this paper was conducted he was WardsVisiting Lecturerat the Universityof Glasgow.His researchfocuses primarilyon transnational reportingissues. **S. J. Gray is Professor of Accountingand Directorof the Centre for International Financeand Accountingat the Universityof Glasgowin Scotland. His researchfocuses primarilyon the internationalaspects of accountingand information disclosuresby multinationals. The authorswould like to acknowledgethe helpfulcommentsreceivedfrom the reviewersand from participantsat presentationsat OklahomaStateUniversityand the EuropeanAccountingAssociation Annual Congressin Nice, France. Received:January1988;Revised:June 1988;Accepted:August 1988. 315
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JOURNALOF INTERNATIONALBUSINESSSTUDIES,SUMMER1989
a removalof a potentialbarrierto foreignlistingsas well as the promotion of a free flow of investmentinternationally. The purposeof this studyis to investigatethe extentto whichthe disclosure requirementsof the London Stock Exchangerelatingto companyannual reportsare compliedwith or exceededby foreigncompanieslisted on the Exchange,with particularreferenceto ContinentalEuropeancompanies. This is of interestbecause such companiesare likely to be motivatedto disclose additional informationby their choice to raise capital in internationalfinancialmarketsand by a desireto competesuccessfullyfor funds withU.K. companies.The responseof thesecompaniesto UnitedKingdom requirementswill be assessedtogetherwith the extent of their voluntary disclosureswhich go beyond existingrequirementsincorporatedin stock exchangerules,companylaw, and accountingstandards.By examiningthe voluntarydisclosuresmade by these companies,we learnaboutthe impact of competitivecapitalmarketpressuresand about the outcomesof assessmentsof the cost-benefittrade-offsthat areinvolvedin choicesaboutfinancial reportingin an internationalcontext.Ourfindingsshouldbe of interest competingfor capital to othercompaniesthateitherareor arecontemplating in the internationalmarketplacein termsof indicatingprevailing'standards' reportingpractices.They should also be of interest of market-determined to such policy-makingbodies as the InternationalAccountingStandards Committee(IASC),whichseeksto promotethe internationalcoordination of financial reportingrequirements[IASC 1983]. The
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