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http://ssrn.com/abstract=1076800
 
 

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Earnings Restatements, the Sarbanes-Oxley Act and the Disciplining of Chief Financial Officers


Denton Collins


Texas Tech University - Area of Accounting

Adi Masli


University of Arkansas - Sam M. Walton College of Business

Austin L. Reitenga


University of Alabama

Juan Manuel Sanchez


Texas Tech University

March 1, 2010

Journal of Accounting, Auditing and Finance, Vol. 24, No. 1, pp. 1-34, 2009

Abstract:     
We investigate involuntary chief financial officer (CFO) turnover following earnings restatements, the labor market penalties imposed on former restatement-firm CFOs, and whether these disciplinary consequences have increased following the passage of the Sarbanes-Oxley Act of 2002 (SOX). Our results suggest that, relative to a control group of non-restating firms, firms restating earnings have higher rates of involuntary CFO turnover, and that former restatement-firm CFOs face stiff labor market penalties. We generally find that the passage of SOX has not increased involuntary CFO turnover rates following restatements. However, we find that labor market penalties for former CFOs of restatement firms are more severe in the post-SOX period, suggesting that SOX has increased ex post settling up costs. Our results suggest that the influence of SOX on the labor market has resulted in CFOs being held more accountable for their actions.

Number of Pages in PDF File: 44

Keywords: Earnings restatements, chief financial officers, executive compensation, executive turnover, labor market penalties, disciplinary actions

JEL Classification: M51, M52

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Date posted: December 21, 2007 ; Last revised: March 2, 2010

Suggested Citation

Collins, Denton and Masli, Adi and Reitenga, Austin L. and Sanchez, Juan Manuel, Earnings Restatements, the Sarbanes-Oxley Act and the Disciplining of Chief Financial Officers (March 1, 2010). Journal of Accounting, Auditing and Finance, Vol. 24, No. 1, pp. 1-34, 2009. Available at SSRN: http://ssrn.com/abstract=1076800 or http://dx.doi.org/10.2139/ssrn.1076800

Contact Information

Denton Collins
Texas Tech University - Area of Accounting ( email )
Lubbock, TX 79409
United States
Adi Masli
University of Arkansas - Sam M. Walton College of Business ( email )
Fayetteville, AR 72701
United States
Austin L. Reitenga (Contact Author)
University of Alabama ( email )
Culverhouse College of Commerce
Box 870223
Tuscaloosa, AL 78249
United States
205-348-5780 (Phone)
Juan Manuel Sanchez
Texas Tech University ( email )
Lubbock, TX 79409
United States
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