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Implications of financial statement restatements of different items

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  • Katsiaryna Salavei

Abstract

This study examines short-term market reaction to financial statement restatements conditional on the initial level of noise in a restated account. I find evidence suggesting that the initial degree of estimation of restated items is an important determinant of market reaction. Investors do not penalize firms that restate noisy items as much as firms that make mistakes in precise items. Moreover, investors anticipate restatements of less noisy items, while the restatements of items that involve a substantial degree of estimation come as a surprise.

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  • Katsiaryna Salavei, 2010. "Implications of financial statement restatements of different items," Applied Financial Economics, Taylor & Francis Journals, vol. 20(11), pages 879-890.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:11:p:879-890
    DOI: 10.1080/09603101003689708
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    References listed on IDEAS

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    1. Admati, Anat R & Pfleiderer, Paul, 2000. "Forcing Firms to Talk: Financial Disclosure Regulation and Externalities," The Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 479-519.
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    3. Wayne R. Landsman & Edward L. Maydew, 2002. "Has the Information Content of Quarterly Earnings Announcements Declined in the Past Three Decades?," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 797-808, June.
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