If you want to make a name for yourself in Economics, you have to publish in English, as it has become the lingua franca of the profession. But in which language a firm's annual report is issued, would not matter, right?
Wrong. Thomas Jeanjean, Hervé Stolowy and Michael Erkens show that publishing an annual report in English, in addition to the local language, increases the pool of potential investors and thus reduces information assymetry. They are careful to address the endogeneity issue here, of course, as a firm may issue an English report because the investor base has broadened. This language effect is similar to the adoption of particular accounting standards, as this allows investors to better understand the firm. Empirically, this improved information translates into lower bid-ask spreads on the stock market, larger following by analysts, and a larger share of foreign ownership. Whether this impacts also firm value is not addressed, though.
d-i-d ps matching estimator takes care of time fixed endogeneity. Expected opportunities unobserved to the researcher are still ommited variable that can cause bias.
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