Contagion effect of restatements through common directorships

• Main Author: CHEN, Chih-Ying
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/786; http://aaahq.org/meetings/AUD2010/ContagionEffectRestatements.pdf
• Institution: Singapore Management University

We predict that when a restatement is disclosed, information on the lower monitoring quality of the directors at the restating firms (“tainted directors”) can transfer to other firms these directors also serve on (“contagion firms”), and that this information transfer causes investors to reassess th...