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Industry Signals Relayed by Corporate Earnings Restatements

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  • Aigbe Akhigbe
  • Jeff Madura

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.

Suggested Citation

  • Aigbe Akhigbe & Jeff Madura, 2008. "Industry Signals Relayed by Corporate Earnings Restatements," The Financial Review, Eastern Finance Association, vol. 43(4), pages 569-589, November.
    • Handle: RePEc:bla:finrev:v:43:y:2008:i:4:p:569-589
    DOI: 10.1111/j.1540-6288.2008.00203.x
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