Рамазян Нелли Арменовна
Market Reaction to Accounting Restatements
This study investigates the market reaction to accounting restatement announcements using a sample of 1092 restatements made by US public companies from 1997 to 2006. In particular, the impact of the Sarbanes-Oxley (SOX) Act on market reaction to restatements is analyzed. Both parametric and non-parametric statistical tests are used along with regression analysis. Obtained results indicate significant negative returns around announcement dates. Restatements made after the passage of SOX generate less negative returns. More negative returns are linked to restatement of revenues and non-disclosure of restatement initiating party. No change in bid-ask spreads is found around announcement days. Stock trading volume increases prior to restatement announcements and decreases in the following days.