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The value relevance of accounting:: The rest of the story

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  • Wallace, Wanda

Abstract

When a story appears in the media reporting `restatements, frauds, and investigations,' how do reported dollar effects relate to value? Declines to about half the pre-event levels are observed, even when the overall market has been increasing significantly. The declines in price (cum dividend) are significantly associated with the amount of the event's effect, as reported in the media, when concurrently controlling for earnings, industry, market, and scalar (book value) effects. The Value Line evaluations of these companies' safety, financial strength, price stability, and technical ranking all deteriorate significantly post-event. Managers evaluating their accounting and controls should consider such consequences.

Suggested Citation

  • Wallace, Wanda, 2000. "The value relevance of accounting:: The rest of the story," European Management Journal, Elsevier, vol. 18(6), pages 675-682, December.
    • Handle: RePEc:eee:eurman:v:18:y:2000:i:6:p:675-682
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    Cited by:

    1. John Goodwin & Yigit Atilgan & Serif Aziz Simsir & Kamran Ahmed, 2020. "Investor reaction to accounting misstatements under IFRS: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2467-2512, September.
    2. Kamran Ahmed & John Goodwin, 2007. "An empirical investigation of earnings restatements by Australian firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(1), pages 1-22, March.

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