Earnings Restatements and Differential Timeliness of Accounting Conservatism

Journal of Accounting and Economics, Forthcoming

40 Pages Posted: 8 Jul 2009 Last revised: 12 Jul 2012

See all articles by Michael Ettredge

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Ying (Julie) Huang

University of Louisville

Weining Zhang

Cheung Kong Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 10, 2012

Abstract

We examine whether Basu’s (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2,132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

Keywords: Basu model, conservatism, differential timeliness, C-Score, restatements, governance

JEL Classification: M41, G34, M43

Suggested Citation

Ettredge, Michael L. and Huang, Ying and Zhang, Weining, Earnings Restatements and Differential Timeliness of Accounting Conservatism (January 10, 2012). Journal of Accounting and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1431545 or http://dx.doi.org/10.2139/ssrn.1431545

Michael L. Ettredge (Contact Author)

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7537 (Phone)
785-864-5328 (Fax)

Ying Huang

University of Louisville ( email )

School of Accountancy
College of Business
Louisville, KY KY Kentucky 40292
United States
5028521647 (Phone)
5028521647 (Fax)

HOME PAGE: http://www.linkedin.com/in/ying-julie-huang-02093769

Weining Zhang

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

HOME PAGE: http://english.ckgsb.edu.cn/FacultyResearch/Faculty/Accounting/ZhangWeining.aspx

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