| Author: | Palmrose, Z-V. Richardson, V.J. Scholz, S. |
| Title: | Determinants of market reactions to restatement announcements |
| Journal: | Journal of Accounting & Economics
2004 : FEB, VOL. 37:1, p. 59-89 |
| Index terms: | Accounting Auditors Financial markets Securities Incomes Rate of return USA |
| Language: | eng |
| Abstract: | This paper examines the market reaction to a sample of 403 restatements (hereafter as: rest.) announced from 1995 to 1999. An average abnormal return of about -9 percent over a 2-day announcement (here as: ann. / ann.s) window is documented. It is found that more negative returns are associated with rest. involving fraud, affecting more accounts, decreasing reported income and attributed to auditors or management. There appears to be an additional penalty for ann.s that do not quantify the rest. Finally, evidence is provided on the relation btw. rest. ann.s and analyst earnings forecast dispersion, bid-ask spreads and subsequent revisions in analyst earnings forecasts. |
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