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Earnings restatements and differential timeliness of accounting conservatism

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  • Ettredge, Michael
  • Huang, Ying
  • Zhang, Weining

Abstract

We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

Suggested Citation

  • Ettredge, Michael & Huang, Ying & Zhang, Weining, 2012. "Earnings restatements and differential timeliness of accounting conservatism," Journal of Accounting and Economics, Elsevier, vol. 53(3), pages 489-503.
    • Handle: RePEc:eee:jaecon:v:53:y:2012:i:3:p:489-503
    DOI: 10.1016/j.jacceco.2012.01.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Basu model; Conservatism; Differential timeliness; C-Score; Restatement; Governance;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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