Using event history analysis, we find that CEOs and CFOs of firms filing a material financial restatement are more than twice as likely to turn over as their counterparts in a matched sample of control firms. Directors and audit committee members are approximately 70 percent more likely to turn over in restatement versus control firms. The magnitude, ubiquity, and temporal proximity of executive and director turnover following a restatement announcement indicate that restatements pose a serious threat to organizational legitimacy, independent of firm performance. Restatements therefore provide an important and unique context for studying the accountability of strategic leaders for organizational crises.
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