Determinants and economic consequences of cash flow restatements

Alfonso, Elio; Christie, Andrew A.; Hollie, Dana; Yu, Shaokun Carol

doi:10.1016/j.jaccpubpol.2018.01.001

Cited by 9 publications

(6 citation statements)

References 44 publications

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“…Audit quality enhances the credibility of financial statements to users of accounting information because it helps management confirm the company's activities and operation and reduces the level of risk for users of the information (Coffie et al, 2018). This audit quality measurement is consistent with previous research (Alfonso et al, 2018;Chi & Su, 2014) which used a dummy variable, where 1 is given to companies that use auditors from KAP Big 4 and 0 is given to companies that use auditors from KAP Non-Big 4.…”

Section: Literature Reviewsupporting

confidence: 80%

The Impact of Capital Adequacy Ratio, Credit Risk, Market Risk, Financial Distress, and Macroeconomic Toward Stock Return With Audit Quality as Moderator

Yoewono

Ariyanto²

2022

AFS

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This study was conducted to analyze the effect of capital adequacy ratio, credit risk, market risk, financial distress, inflation, and the exchange rate on stock returns with audit quality as moderating. The object of this research is companies in the banking sector listed on the Indonesia Stock Exchange for the period 2015-2020. This research was conducted with the aim of explaining quantitatively the attitude tendency of the population by examining a sample of the population. The research data is included in the type of secondary data in the form of financial reports and bank annual reports book 3 and book 4 of the implementation of Basel during the period 2015-2020. The data was obtained from the Indonesia Stock Exchange website, namely the website www.idx.co.id. The data analysis method used in this study uses panel data regression with the help of the Eviews 10 program. The results of this study conclude that the capital adequacy ratio, market risk, financial distress, inflation, exchange rate, and audit quality have no effect on stock returns. However, credit risk has an influence on stock returns. In this study there is a moderating variable, obtained audit quality as a moderating variable does not affect the relationship between capital adequacy ratio, market risk, financial distress, inflation, and the exchange rate to stock returns. However, audit quality as a moderating variable is able to influence the relationship between credit risk and stock return.

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Section: Literature Reviewsupporting

confidence: 80%

The Impact of Capital Adequacy Ratio, Credit Risk, Market Risk, Financial Distress, and Macroeconomic Toward Stock Return With Audit Quality as Moderator

Yoewono

Ariyanto²

2022

AFS

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“…The study makes the following contributions. While most studies on analyst behavior toward restatements focus on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion (Griffin, 2003;Ye and Yu, 2017;Alfonso et al, 2018), our study contributes to the literature by examining if and how the restatements affect the analysts' final output as reflected in the nature of the recommendation opinion, an area that has so far received little attention. As a matter of fact, most existing studies on the determinants of analysts' buy/hold/sell recommendations have only considered various firm-specific factors, such as strength of corporate governance (Yu, 2011), corporate social responsibility initiatives (Ioannou and Serafeim, 2015), earnings growth and risk (Peasnell et al, 2018), shareholder rights (Autore et al, 2009), equity incentive plans (Liu, 2017) and degree of internationalization (Luo and Zheng, 2018).…”

Section: Introductionmentioning

confidence: 98%

Financial restatements and sell-side analysts' stock recommendations: evidence from Malaysia

Qasem

Aripin

Wan‐Hussin

2020

IJMF

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PurposeThe purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.Design/methodology/approachThe sample of this study is based on a dataset from a panel of 246 Malaysian public listed companies for the period 2008 to 2013 (651 company-year observations). This study employs feasible generalized least squares regression.FindingsThis study finds a negative and significant relationship between restated companies and sell-side analysts' stock recommendations, which means that sell-side analysts issue less favorable stock recommendations for restated companies.Practical implicationsThe findings based on observations from an emerging economy complement the results of the US studies that analysts revise their earnings forecasts or recommendations downwards or drop coverage following financial restatements. The results of this study should be useful to capital market participants in understanding how analysts perceive and evaluate restated companies.Originality/valueThis paper expands the literature on financial restatements consequences in an emerging market which is largely unstudied. Prior research on analyst behavior towards restatements has focused on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion. This study examines if and how the restatements affect the analysts' final output as reflected in the recommendation opinion, an area that has so far received little attention.

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“…Mangers also resort to tax planning and report higher operating cash flows following the presence of analysts' cash flow forecasts (Ayers et al, 2018). Focusing on resulting consequences of manipulation, Alfonso et al (2018) find that the stock market reacts negatively to cash flow restatements.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 98%

Internal corporate governance and cash flow manipulation

Nagar

Raithatha

2022

IJOEM

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PurposeThe authors examine whether internal corporate governance mechanisms are effective in curbing cash flow manipulation through real activities, misclassification, and timing.Design/methodology/approachThe sample comprises of firms from an emerging market, India with data for years 2004 through 2015. The authors use the methodology given in Roychowdhury (2006).FindingsThe authors find that corporate boards in India play an active role in curbing cash flow manipulation through real activities but fail to control cash flow manipulation through misclassification and timing.Practical implicationsThe study suggests that corporate boards should pay more attention to the reported cash flow numbers. Regulators can reduce the opportunities available for cash flow misclassification by fixing relevant accounting and governance norms. Auditors can also help by critically focusing on the cash flow classifications presented by management.Originality/valueThis study, to the authors’ knowledge, is the first study that talks about the role of internal governance in a trade-off between different cash flow manipulation techniques.

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Determinants and economic consequences of cash flow restatements

Cited by 9 publications

References 44 publications

The Impact of Capital Adequacy Ratio, Credit Risk, Market Risk, Financial Distress, and Macroeconomic Toward Stock Return With Audit Quality as Moderator

The Impact of Capital Adequacy Ratio, Credit Risk, Market Risk, Financial Distress, and Macroeconomic Toward Stock Return With Audit Quality as Moderator

Financial restatements and sell-side analysts' stock recommendations: evidence from Malaysia

Internal corporate governance and cash flow manipulation

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