Earnings Restatements and Differential Timeliness of Accounting Conservatism

  title={Earnings Restatements and Differential Timeliness of Accounting Conservatism},
  author={Michael L. Ettredge and Ying (Julie) Huang and Weining Zhang},
  journal={Corporate Finance: Governance},
We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance… 

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