Investor Reaction to Accounting Misstatements Under IFRS: Australian Evidence
Accounting & Finance, Vol. 60, No. 3, 2020
51 Pages Posted: 30 Sep 2016 Last revised: 2 Oct 2020
Date Written: April 19, 2018
Abstract
We examine the investor reaction to misstatement news for Australian listed firms from 2006 to 2013. We find 4.1% of firm-years have a misstatement and 79% of misstatements are disclosed initially only in the periodic filings (stealth misstatements). We find no investor reaction for the average misstatement, reactions of between -2.3% and -2.8% (-1.5% and -1.7%) for misstatements that reduce prior-period earnings or equity (affect revenue), and reactions of between -1.3% and -2.7% for non-stealth misstatements. Investor reactions are more negative for non-stealth misstatements that reduce prior-period earnings or equity than to stealth misstatements.
Keywords: misstatement news, investor reaction, stealth misstatements
JEL Classification: M41, M42, M51
Suggested Citation: Suggested Citation