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Document Type
Dissertation
Degree
Doctor of Philosophy
Department
Finance
Advisor's Name
Dr. Arun J. Prakash
Advisor's Title
Committee Chair
Advisor's Name
Dr. Ali Parhizgari
Advisor's Title
Committee Member
Advisor's Name
Dr. Chun-Hao Chang
Advisor's Title
Committee Member
Advisor's Name
Dr. Edward R. Lawrence
Advisor's Title
Committee Member
Advisor's Name
Dr. Gauri Ghai
Advisor's Title
Committee Member
Keywords
market microstructure, corporate governance, information asymmetry, restatement
Date of Defense
7-21-2008
Abstract
The increase in the number of financial restatements in recent years has resulted in a significant decrease in the amount of market capitalization for restated companies. Prior literature does not differentiate between single and multiple restatements announcements. This research investigates the inter-relationships among multiple financial restatements, corporate governance, market microstructure and the firm's rate of return in the form of three essays by differentiating between single and multiple restatement announcement companies.
First essay examines the stock performance of companies announcing the financial restatement multiple times. The postulation is that prior research overestimates the abnormal return by not separating single restatement companies from multiple restatement companies. This study investigates how market penalizes the companies that announce restatement more than once. Differentiating the restatement announcement data based on number of restatement announcements, the results support for non persistence hypothesis that the market has no memory and negative abnormal returns obtained after each of the restatement announcements are completely random.
Second essay examines the multiple restatement announcements and its perceived resultant information asymmetry around the announcement day. This study examines the pattern of information asymmetry for these announcements in terms of whether the bid-ask spread widens around the announcement day. The empirical analysis supports the hypotheses that the spread does widen not only around the first restatement announcement day but around every subsequent announcement days as well.
The third essay empirically examines the financial and corporate governance characteristics of single and multiple restatement announcements companies. The analysis shows that corporate governance variables influence the occurrence of multiple restatement announcements and can distinguish multiple restatements announcement companies from single restatement announcement companies.
Recommended Citation
Shankar, Siddharth, "Three Essays on the Interrelationships Among Financial Restatements, Corporate Governance, Market Microstructure and the Firm's Rate of Return" (2008). FIU Electronic Theses and Dissertations. Paper 72.
http://digitalcommons.fiu.edu/etd/72