Earnings restatements and differential timeliness of accounting conservatism

Michael Ettredge, Ying Huang and Weining Zhang

Journal of Accounting and Economics, 2012, vol. 53, issue 3, 489-503

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 2132 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; Restatement; Governance (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:53:y:2012:i:3:p:489-503

DOI: 10.1016/j.jacceco.2012.01.002

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