Do Companies Attempt to Strategically Hide Restatements? An Examination of Companies’ Regulatory Filing Choices

38 Pages Posted: 7 Apr 2010 Last revised: 28 Aug 2015

See all articles by Marlene Plumlee

Marlene Plumlee

University of Utah - School of Accounting

Teri Lombardi Yohn

Emory University Goizueta Business School

Date Written: June 30, 2010

Abstract

This study explores the factors associated with companies’ regulatory filing choices surrounding the restatement of previously filed financial statements. Companies have three regulatory filing alternatives of decreasing transparency: file an 8-K report, file an amended report, or restate the previous financial statements in subsequent regulatory filings. We examine whether the transparency of the regulatory filing decision is associated with the materiality of the restatement and/or company-specific strategic factors. We document that the decision to file 8-K reports is increasing with the materiality factors rather than with companies attempting to strategically hide restatements. The SEC’s rule change that clarified companies’ duties to report restatements in 8-K reports increased the use of 8-Ks, although it did not affect the importance of the various factors in that decision. The amended filing decision, a less transparent choice for which the SEC provides little to no guidance, is more complex: strategic factors are significantly associated with the amended filing decision both prior to and subsequent to the 8-K rule change. In addition, after the SEC rule change, companies are less likely to file amended reports but when an 8-K is filed, the company is more likely to also file an amended report. Our results suggest that the SEC guidance regarding the 8-K restatement filing requirements appears to have led to the intended consequences for 8-K filings, and that the SEC should perhaps consider providing additional guidance on the amended filing requirements.

Keywords: restatement, disclosure venue, materiality, voluntary incentives, 8-K filings, amended filings

JEL Classification: M41, G14

Suggested Citation

Plumlee, Marlene A. and Yohn, Teri Lombardi, Do Companies Attempt to Strategically Hide Restatements? An Examination of Companies’ Regulatory Filing Choices (June 30, 2010). Available at SSRN: https://ssrn.com/abstract=1586055 or http://dx.doi.org/10.2139/ssrn.1586055

Marlene A. Plumlee (Contact Author)

University of Utah - School of Accounting ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Teri Lombardi Yohn

Emory University Goizueta Business School ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
300
Abstract Views
2,004
rank
114,395
PlumX Metrics