The Impact of Financial Restatements on Information Content of Earnings
Date Issued
2008
Date
2008
Author(s)
Lin, Yi-Chieh
Abstract
The purpose of this study is to explore the impact of financial restatements on information content of earnings- whether restatements would induce investors to rely less on future financial statements so that the information content of earnings declines following restatements. This study also analyzed whether different restatements types, restatements reasons, the responses on restatements announcement date, auditor dismissals and management turnover would induce different degrees of decline in information content of earnings following restatements.his study referred to the method mentioned in Wilson (2008) to conduct a research in Taiwan’s capital market. The empirical research showed that the information content of earnings indeed declined following restatements, and the result was not affected by different event research windows or periods following restatements. In addition, the decline in the information content of earnings was longer-lasting following restatements for correcting revenue recognition problems than for other reasons. It also decreased more in the third、fifth、sixth and seventh quarter. However, different restatements types, the responses on restatements announcement date, auditor dismissals and management turnover would not induce different degrees of decline in information content of earnings following restatements.
Subjects
information content of earnings
earnings response coefficient
restatements
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