IDEAS home Printed from https://ideas.repec.org/a/ids/intjaf/v1y2009i4p375-394.html
   My bibliography  Save this article

Do firms become more conservative after financial restatements?

Author

Listed:
  • Rongbing Huang
  • Zhaoyun Shangguan
  • Gopala Vasudevan

Abstract

We examine whether firms' earnings exhibit higher degrees of conservatism after restating their financial statements. Conservatism is defined as more timely recognition of gains than losses in earnings (Basu, 1997). Using a sample of restatements derived from the Government Accountability Office (GAO) database and four alternative measures of earnings conservatism, we find that overall the restating firms' earnings exhibit greater conservatism during the two years following restatements. This increase is more pronounced for firms that self-prompt their restatements than firms that are prompted to restate by external parties such as auditors or the Securities and Exchange Commission (SEC). We also find weak evidence suggesting that the post-restatement increase in conservatism is more pronounced after the Sarbanes-Oxley Act (SOX) enactment in 2002.

Suggested Citation

  • Rongbing Huang & Zhaoyun Shangguan & Gopala Vasudevan, 2009. "Do firms become more conservative after financial restatements?," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(4), pages 375-394.
    • Handle: RePEc:ids:intjaf:v:1:y:2009:i:4:p:375-394
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=29145
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kose John & Joe Shangguan & Ravi Mateti, 2015. "Financing activities after accounting restatements: an examination of SEOs and PIPEs," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 139-160, June.
    2. Jo-Ting Wei, 2021. "Financial Reporting Material Misstatements, Earnings Conservatism and Managerial Replacement Decisions," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 14(1), pages 7-21, June.
    3. Cao, Viet Nga & Pham, Anh Viet, 2021. "Behavioral spillover between firms with shared auditors: The monitoring role of capital market investors," Journal of Corporate Finance, Elsevier, vol. 68(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:intjaf:v:1:y:2009:i:4:p:375-394. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=231 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.