Industry Signals Relayed by Corporate Earnings Restatements

Posted: 14 Sep 2008

See all articles by Aigbe Akhigbe

Aigbe Akhigbe

University of Akron - Department of Finance

Jeff Madura

Florida Atlantic University - College of Business

Date Written: September 12, 2008

Abstract

This study finds that downward earnings restatements are associated with negative industry valuation effects. These effects are more pronounced when the valuation effects and the change in earnings of the firm restating its earnings are worse, when the restatement is initiated for reasons other than fraud, when the bubble was bursting and when the restatement is subsequent to the publicity regarding Enron's fraud. The negative industry effects are more pronounced in industries that have a higher level of accruals and intangible assets, weaker sales growth, and a higher degree of stock volatility.

Keywords: earnings restatements, industry effects, contagion effects

JEL Classification: G10, G14

Suggested Citation

Akhigbe, Aigbe and Madura, Jeff, Industry Signals Relayed by Corporate Earnings Restatements (September 12, 2008). Financial Review, Vol. 43, No. 4, November 2008, Available at SSRN: https://ssrn.com/abstract=1267485

Aigbe Akhigbe (Contact Author)

University of Akron - Department of Finance ( email )

Akron, OH 44325-4803
United States
330-972-6883 (Phone)

Jeff Madura

Florida Atlantic University - College of Business ( email )

University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States
(954)762-5632 (Phone)
(954)762-5245 (Fax)

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