Date of Award

Summer 2005

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Program/Concentration

Business Administration-Finance

Committee Director

Mohammad Najand

Committee Member

Kenneth Yung

Committee Member

Douglas Ziegenfuss

Abstract

This dissertation studies three financial topics using earnings restatement data. In the first topic, we discriminate between the market efficiency hypothesis and the underreaction hypothesis by examining their predictions on the stock performance of restating firms in the post-announcement period. Three approaches are used, namely, the cumulative abnormal return (CAR), buy-and-hold abnormal return (BHAR), and calendar time portfolio approaches. Consistent with the market efficiency hypothesis, we do not find significant abnormal performance in the post-restatement period. In the second topic, we test the extrapolation model (LSV, 1994) by examining the relationship between stock price reaction to earnings restatement and the glamour/value stock characteristics. We illustrate that depending on whether investors change their naïve expectation strategy, there are two possible stock price reaction patterns. Our results do not support the naïve extrapolation model. In the third topic, we test whether earnings restatement has contagion effect and competitive effect. The results are mixed: we find intra-industry effect and the effect varies by industry characteristics using the regression method while we find no such effect using the stratification method. Besides the three topics, this dissertation documents some characteristics of restating firms in the sample period, including the book-to-market (BM) ratio, market capitalization, and leverage.

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In Copyright. URI: http://rightsstatements.org/vocab/InC/1.0/ This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s).

DOI

10.25777/cj6r-kg36

ISBN

9780542360985

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