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Article: Rewriting earnings history

TitleRewriting earnings history
Authors
KeywordsClass action lawsuits
Financial information
Historical record
Investors' decisions
Revisions
Issue Date2008
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653
Citation
Review Of Accounting Studies, 2008, v. 13 n. 4, p. 419-451 How to Cite?
AbstractResearch on the usefulness of financial information generally focuses on the innovation in the information examined, such as an earnings surprise or cash flow growth. Consequently, prior research sheds little light on the role of the rich historical record of financial information in users' decision-making. Using a sample of published restatements of earnings, we show that the revision of the historical pattern of earnings, distinct from the magnitude of the restatement and its impact on current earnings, significantly affects investors' decisions and predicts class action lawsuits. Specifically, we find that restatements that eliminate or shorten histories of earnings growth or positive earnings have significantly more adverse effects for investor valuations and the likelihood of lawsuits than other restatements. This evidence about the value-relevance of refreshing the historical record of earnings is pertinent to the FASB's recent cautious expansion of the scope of circumstances that require a restatement of financial information in FAS 154. © 2007 Springer Science+Business Media, LLC.
Persistent Identifierhttp://hdl.handle.net/10722/60231
ISSN
2015 Impact Factor: 1.513
2015 SCImago Journal Rankings: 2.039
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLev, Ben_HK
dc.contributor.authorRyan, SGen_HK
dc.contributor.authorWu, Men_HK
dc.date.accessioned2010-05-31T04:06:20Z-
dc.date.available2010-05-31T04:06:20Z-
dc.date.issued2008en_HK
dc.identifier.citationReview Of Accounting Studies, 2008, v. 13 n. 4, p. 419-451en_HK
dc.identifier.issn1380-6653en_HK
dc.identifier.urihttp://hdl.handle.net/10722/60231-
dc.description.abstractResearch on the usefulness of financial information generally focuses on the innovation in the information examined, such as an earnings surprise or cash flow growth. Consequently, prior research sheds little light on the role of the rich historical record of financial information in users' decision-making. Using a sample of published restatements of earnings, we show that the revision of the historical pattern of earnings, distinct from the magnitude of the restatement and its impact on current earnings, significantly affects investors' decisions and predicts class action lawsuits. Specifically, we find that restatements that eliminate or shorten histories of earnings growth or positive earnings have significantly more adverse effects for investor valuations and the likelihood of lawsuits than other restatements. This evidence about the value-relevance of refreshing the historical record of earnings is pertinent to the FASB's recent cautious expansion of the scope of circumstances that require a restatement of financial information in FAS 154. © 2007 Springer Science+Business Media, LLC.en_HK
dc.languageengen_HK
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653en_HK
dc.relation.ispartofReview of Accounting Studiesen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThe original publication is available at www.springerlink.com-
dc.subjectClass action lawsuitsen_HK
dc.subjectFinancial informationen_HK
dc.subjectHistorical recorden_HK
dc.subjectInvestors' decisionsen_HK
dc.subjectRevisionsen_HK
dc.titleRewriting earnings historyen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1380-6653&volume=13&spage=419&epage=451&date=2008&atitle=Rewriting+Earnings+Historyen_HK
dc.identifier.emailWu, M: mw1688@hku.hken_HK
dc.identifier.authorityWu, M=rp01115en_HK
dc.description.naturepreprint-
dc.identifier.doi10.1007/s11142-007-9041-4en_HK
dc.identifier.scopuseid_2-s2.0-50149090020en_HK
dc.identifier.hkuros162891en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-50149090020&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume13en_HK
dc.identifier.issue4en_HK
dc.identifier.spage419en_HK
dc.identifier.epage451en_HK
dc.identifier.isiWOS:000258541300001-
dc.publisher.placeUnited Statesen_HK
dc.identifier.ssrn878690-
dc.identifier.scopusauthoridLev, B=7006690925en_HK
dc.identifier.scopusauthoridRyan, SG=35574572600en_HK
dc.identifier.scopusauthoridWu, M=7405591838en_HK

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