Information asymmetry and accounting restatement

Authors: Duong Nguyen Tribhuvan N Puri

Publish Date: 2013/03/28

Volume: 43, Issue: 2, Pages: 211-244

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Abstract

We examine the impact of accounting restatement announcement on firms’ value and information asymmetry for both auction market NYSEAMEX and dealer market NASDAQ using a public sample of restatement announcements from 1997 to 2005 In both markets we document economically and significantly negative mean cumulative abnormal returns around the announcement dates The restatements attributed to auditors are associated with more negative returns than those attributed to management and the SEC However there is no significant difference between market reactions arising from the core and noncore restatements We also find a significant increase in volume number of transactions average order size volatility and various measures of spreads after the restatement announcement indicating that restatement announcements diminish company prospects and contribute to increased uncertainty and information asymmetry Finally we find that the information asymmetry in the NASDAQ market around the event date is less pronounced than in the NYSEAMEX market

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