How financial restatements affect investor confidence

Description

Abstract: In recent years, many companies have restated their financial statements due to material accounting errors or fraud. This brief article looks at a recent study that examined how these restatements affect investor confidence in a company’s earnings reports, and for how long. The study provides some ammunition for the argument that a restatement’s impact on stock prices is longer-lived than previously thought, and offers guidance for assessing economic damages caused by financial restatements and a party’s efforts to mitigate those damages.