Rebuilding Reputation after a Serious Financial Restatement

10.13007/313 ◽  
2014 ◽  
Keyword(s):  
Financial Restatement

scholarly journals How Firms Respond to Financial Restatement: CEO Successors and External Reactions

2014 ◽  
Vol 57 (6) ◽  
pp. 1759-1785 ◽  
Author(s):  
David Gomulya ◽  
Warren Boeker
Keyword(s):  
Financial Restatement

scholarly journals Financial Restatement Period: Internal and External Auditing Mechanism

2021 ◽  
Vol 24 (01) ◽  
Author(s):  
Elfina Astrella Sambuaga ◽  
Chelsea Chen ◽  
Kristina Fransiska ◽  
Jeanette Yovanka
Keyword(s):  
Financial Restatement

Managing reputation loss in China: in-depth analyses of financial restatements

2016 ◽  
Vol 10 (2) ◽  
pp. 312-345 ◽  
Author(s):  
Peng Wu ◽  
Lei Gao ◽  
Zhibin Chen ◽  
Xiao Li
Keyword(s):  
Crisis Management ◽  
Significant Relationship ◽  
Stock Markets ◽  
Financial Distress ◽  
State Ownership ◽  
Economic Consequences ◽  
Content Type ◽  
Financial Restatement ◽  
Financial Restatements ◽  
Crisis Responses

Purpose This paper aims to investigate, in China stock market, whether the reputation loss of a firm caused by financial restatements will lead to significant economic consequences such as financial distress and how a firm should respond to such a crisis. Design/methodology/approach This paper uses Chinese A-share listed firms from 2004 to 2013 as research samples to test research hypotheses using regression analyses. Findings This paper finds a significant relationship between restatements and financial distress, and such a relationship will be affected by both the type and the magnitude of restatements. More importantly, we find joint effects of restatements and state ownership on financial distress, which provides a unique contribution to the extant literature in restatement, financial distress and crisis management using Chinese stock markets data. It shows that ownership structure, affecting the firm reputation and crisis responses strategies, plays a significant role in consequences of restatements, and it is more important for state-owned enterprises (SOEs) to undertake an appropriate crisis response strategy to reduce the negative impact of restatements. Practical implications The results suggest that the damage to a firm’s reputation caused by restatements is affected by restatement type and state ownership. To reduce the negative consequences and avoid financial distress, firms should consider both the restatement type and their firm characteristics when deciding different actions to respond to restatements. In particular, SOEs should act in a more timely manner and take reputation-rebuilding actions such as taking the responsibility and making apologies and taking prompt remedial actions after restatements to regain the public trust and avoid more serious economic consequences. The Chinese government should strengthen their supervisions of SOEs and put more effort to help SOEs reduce administrative procedures, and to improve the efficiency of the implementation of recovery plans after restatements to reinstate firm credibility. Originality/value First, this paper is among the first to link financial restatement, including the type and magnitude of restatements, with financial distress, and the authors find a significant relationship between restatement type and financial distress in China stock markets. Second, this paper is the first to examine whether there is a joint effect of state ownership and restatements on financial distress. Third, this study examines how the magnitude and pervasiveness of restatements influence financial distress and find that both result in an increase of financial distress. Finally, this paper is among the first to connect crisis management and accounting literature to explain how a reputation loss caused by financial restatement may damage a firm’s value and subsequent performance, and based on which to suggest crisis-responses strategies.

Is institutional investor a supervisor or cooperator?

2018 ◽  
Vol 9 (1) ◽  
pp. 2-18 ◽  
Author(s):  
Yuedong Li ◽  
Xianbing Liu ◽  
Qing Yan
Keyword(s):  
Institutional Investors ◽  
Institutional Investor ◽  
Test Methods ◽  
Future Research ◽  
Management Turnover ◽  
Content Type ◽  
Financial Restatement ◽  
Strategic Cooperation ◽  
Financial Restatements ◽  
The Relationship

Purpose The purpose of this paper is to discuss whether top management will assume their liabilities especially when financial restatement occurs, and,based on the “effective supervision theory” and “strategic cooperation theory,” to examine whether an institutional investor is a supervisor or a cooperator considering the management turnover caused by financial restatement in the companies. Design/methodology/approach Using a sample of the A-share-listed companies from year 2010 to year 2014 and dividing financial restatement into fraudulent financial restatement and other financial restatement, the authors examine the relationship between financial restatement and abnormal management turnover, which usually is related to the management integrity or capacity. By using group test methods, the authors test the influence of the institutional investors’ shareholding on the relation between financial restatements and management turnover. Findings This paper finds that financial restatement can result in abnormal management turnover, especially the fraudulent financial restatement. The institutional investors usually are supervisors but when the shareholding of institutional investor is too high and the management turnover results from fraudulent financial restatement, the institutional investors may become cooperators with management in the companies. Besides, the institutional investors play the supervisory function more significantly in non-state-owned enterprises. Originality/value This paper expands literature of the institutional investors in the corporate governance area and provides a basis for future research in the area of the institutional investors’ governance effect. It divides financial restatements into fraudulent financial restatement and other financial restatement and examines the relationship between financial restatement and abnormal management turnover so as to provide evidence about whether the management will assume their responsibilities when there is financial restatement in the company. It also tests whether the institutional investors will play supervisor’s or cooperator’s function in state-owned and non-state-owned enterprises.

AIA submission: CEO overconfidence and the incidence of financial restatement

2013 ◽  
Vol 29 (1) ◽  
pp. 74-84 ◽  
Author(s):  
Theresa J. Presley ◽  
Lawrence J. Abbott
Keyword(s):  
Financial Restatement
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