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The impact of financial restatements on sell-side recommendation accuracy

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  • Umar, Muhammad
  • Mirza, Nawazish
  • Ribeiro-Navarrete, Samuel

Abstract

Financial restatements are considered a drag on earnings quality and in this paper, we assess their relationship with the target price accuracy. We constitute a comprehensive sample of firms from BRICS with sell-side coverage for eleven years. Our results suggest that restatements negatively influence the target price precision. Across the different types of recommendations, we observe the negative relationship to be persistent for firms in Buy and Hold categories, while for the Sell recommendations, the relationship was positive. Overall results remained robust for different constructs of forecast accuracy. These findings have important implications for retail and institutional investors and regulators.

Suggested Citation

  • Umar, Muhammad & Mirza, Nawazish & Ribeiro-Navarrete, Samuel, 2023. "The impact of financial restatements on sell-side recommendation accuracy," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002404
    DOI: 10.1016/j.frl.2023.103868
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