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Earnings restatements and differential timeliness of accounting conservatism

  • Ettredge, Michael
  • Huang, Ying
  • Zhang, Weining

We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

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Article provided by Elsevier in its journal Journal of Accounting and Economics.

Volume (Year): 53 (2012)
Issue (Month): 3 ()
Pages: 489-503

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Handle: RePEc:eee:jaecon:v:53:y:2012:i:3:p:489-503
Contact details of provider: Web page: http://www.elsevier.com/locate/jae

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  1. Roychowdhury, Sugata & Watts, Ross L., 2007. "Asymmetric timeliness of earnings, market-to-book and conservatism in financial reporting," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 2-31, September.
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