Accounting Restatements and External Financing Choices

There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external finan...

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Main Authors: CHENG, Qiang, CHEN, Xia, Lo, Alvis
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2012
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Online Access:https://ink.library.smu.edu.sg/soa_research/874
https://ink.library.smu.edu.sg/context/soa_research/article/1873/viewcontent/SSRN_id1325261.pdf
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spelling sg-smu-ink.soa_research-18732018-07-13T06:03:20Z Accounting Restatements and External Financing Choices CHENG, Qiang CHEN, Xia Lo, Alvis There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO/CFO turnover and auditor dismissal. Our evidence indicates that accounting information quality affects capital providers’ resource allocation and that debt holders help alleviate information problems after accounting restatements. 2012-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/874 info:doi/10.1111/j.1911-3846.2012.01171.x https://ink.library.smu.edu.sg/context/soa_research/article/1873/viewcontent/SSRN_id1325261.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University earnings restatements external financing Accounting
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic earnings restatements
external financing
Accounting
spellingShingle earnings restatements
external financing
Accounting
CHENG, Qiang
CHEN, Xia
Lo, Alvis
Accounting Restatements and External Financing Choices
description There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO/CFO turnover and auditor dismissal. Our evidence indicates that accounting information quality affects capital providers’ resource allocation and that debt holders help alleviate information problems after accounting restatements.
format text
author CHENG, Qiang
CHEN, Xia
Lo, Alvis
author_facet CHENG, Qiang
CHEN, Xia
Lo, Alvis
author_sort CHENG, Qiang
title Accounting Restatements and External Financing Choices
title_short Accounting Restatements and External Financing Choices
title_full Accounting Restatements and External Financing Choices
title_fullStr Accounting Restatements and External Financing Choices
title_full_unstemmed Accounting Restatements and External Financing Choices
title_sort accounting restatements and external financing choices
publisher Institutional Knowledge at Singapore Management University
publishDate 2012
url https://ink.library.smu.edu.sg/soa_research/874
https://ink.library.smu.edu.sg/context/soa_research/article/1873/viewcontent/SSRN_id1325261.pdf
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