Financial Statement Credibility: The Contagion Effects of Accounting Restatements
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چکیده
We predict and find that accounting restatements induce economically meaningful share price declines among non-restatement firms in the same industry. These price declines are most pronounced among non-restatement firms with low accounting quality, as measured by industry adjusted accruals. Our results are consistent with the notion that accounting restatements cause investors to reassess the credibility of financial statement information previously released by non-restatement firms. This reassessment then leads to a share price decline that reflects heightened information risk. JEL Classification: G34; D80
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