Review of Accounting and Finance最新文献

Purpose

This study aims to examine whether earnings autocorrelation affects the risk of an accounting restatement.

Design/methodology/approach

This paper uses logistic regression and identifies restatements between 2004 and 2016. Following prior research, (Dao et al., 2012; Francis and Michas, 2013; Francis et al., 2013; Lennox and Li, 2014; Lobo and Zhao, 2013; Paterson and Valencia, 2011), this study allows time between the end of our sample period and the date that this study obtained the restatement data because it takes time for material misstatements to be identified.

Findings

Bryan et al. (2018) report a negative association between autocorrelation and audit fees, suggesting that auditors view lower autocorrelation as increasing inherent risk. This study finds that autocorrelation is negatively related to accounting restatements, implying that although auditors react to lower autocorrelation by increasing their risk assessments (Bryan et al., 2018), their risk response is not sufficient. This study finds that autocorrelation has a fairly large effect: a shift from the 75th to the 25th percentile of autocorrelation is associated with a 9.38% increase in the likelihood of a restatement.

Originality/value

This study contributes to the stream of research that investigates the determinants of restatements. Not only do this study identifies autocorrelation as a factor that contributes to restatements, but importantly, this study’s results reveal a fairly substantial effect size: a shift from the 75th to the 25th percentile of autocorrelation is associated with a 9.38% increase in the likelihood of a restatement. While Bryan et al. (2018) find that autocorrelation affects audit fees, this study links autocorrelation to a more drastic consequence: accounting restatements.

Purpose

The purpose of this paper is to explore the impact of a particular firm’s stakeholder orientation, particularly employee orientation, on corporate communications with stakeholders concerning financial irregularities.

Design/methodology/approach

This study explores the impact of a particular firm’s stakeholder orientation, particularly employee orientation, on corporate communications with stakeholders concerning financial irregularities. Using a sample of 762 firm restatements, the authors separate their observations by disclosure transparency (high or low transparency of disclosure) and use logit regressions to examine whether companies with stronger employee orientation make more or less transparent restatement disclosures.

Findings

The findings show that higher levels of investment in employee orientation are associated with less transparent restatement disclosures. Further, examining a subsample of restatements in which managers may have greater discretion over how a restatement is disclosed confirms this finding. However, supplemental tests show that increased external monitoring may mitigate these effects.

Practical implications

The findings provide support that other stakeholders, such as shareholders, should weigh the potential pros/cons of management investments in corporate social responsibility (CSR). These concerns are more important now as firms continue to embrace a stakeholder-focused model of management which allocates resources to numerous stakeholder groups.

Originality/value

This paper extends the growing body of research that assesses the impact of CSR on firm outcomes (Kim et al., 2012; Guo et al., 2016; Hmaittane et al., 2019). Further, this paper contributes to the disclosure transparency literature by finding an association between CSR investment levels and the manner in which a firm discloses a restatement.