The Restating of Financial Statements by REITs

41 Pages Posted: 30 Oct 2013 Last revised: 25 Sep 2015

See all articles by John C. Adams

John C. Adams

University of Texas at Arlington

Darren K. Hayunga

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Stephanie J. Rasmussen

University of Texas at Arlington

Date Written: September 24, 2015

Abstract

This article is the first to examine financial restatements by Real Estate Investment Trusts (REITs). We provide a descriptive breakdown of the underlying causes of REIT restatements as well as overall and subsample analyses of stock market reactions to restatements from 2000 to 2011. REIT restatements occur for a large variety of accounting issues with the most common being accounting errors related to leases, mergers and acquisitions, depreciation, revenue recognition, and consolidation of subsidiaries. We find that the average market reaction for REIT restatements is negative 0.52 percent, which is less negative than non-REIT restatements. However, investigation reveals a significant portion of REIT restatements result in double-digit excess returns. Overall, the findings suggest REIT restatements occur for a variety of reasons and REIT investors place high value on quality financial statements.

Keywords: REITs, financial restatements

JEL Classification: R21, R23, R31

Suggested Citation

Adams, John C. and Hayunga, Darren K. and Rasmussen, Stephanie J., The Restating of Financial Statements by REITs (September 24, 2015). Journal of Accounting, Auditing and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2346778 or http://dx.doi.org/10.2139/ssrn.2346778

John C. Adams

University of Texas at Arlington ( email )

Box 19449 UTA
Arlington, TX 76019
United States
904-476-2946 (Phone)

Darren K. Hayunga (Contact Author)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-1365 (Phone)

Stephanie J. Rasmussen

University of Texas at Arlington ( email )

Box 19468
Arlington, TX 76019-0468
United States

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