The impact of financial restatements on financial markets: a systematic review of the literature

Abstract

Purpose The purpose of this paper is to discuss the most relevant issues related to the impact of financial restatements in the dynamics of financial markets and identify several research gaps to be investigated in future research. Design/methodology/approach The methodology is based on a systematic review of the literature described by Tranfield et al. (2003). The final sample includes 47 academic papers published from 1996 to 2019. Findings Papers in this domain discuss three main topics: how the market prices the announcement of a financial restatement; how financial restatements affect the announcing firm’s cost of capital and how financial restatements affect firms’ reputation. There are several issues to explore in future research, including whether financial restatements affect the dynamics of financial markets in Europe, whether the market fully and promptly assimilates the information content of a restatement, the role of financial analysts’ information disclosures in this process or how regulators may improve the way they provide investors with timely information about firms’ restating problems. Research limitations/implications There is always some degree of subjectivity in the definition of the keywords, search strings and selection criteria in a systematic review. These are all important aspects, as they delimitate the scope of the study and define the sample of papers to be reviewed. Practical implications The answers to the research questions identified in this paper may provide regulators with information to improve financial accounting and reporting standards and strengthen investors’ confidence in accounting information and the dynamics of financial markets. Originality/value This paper systematically reviews the relevant literature exploring the connection between financial restatements and the dynamics of financial markets. It contributes to the academic community by identifying several research questions that may impact the theory and practice related to accounting quality and capital markets.

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“…This study adopted a systematic approach to conduct a literature review to minimize bias and lend scientific value to its results. To ensure the robustness of our protocol, we built on other literature reviews regarding accounting (Bartolacci et al , 2020; Fragoso et al , 2020; Lombardi and Secundo, 2020; Massaro et al , 2016) and followed Denyer and Tranfield's (2009) transparent, inclusive, explanatory and heuristic principles. Finally, we present our analysis steps using Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA), which assists authors in improving the reporting of systematic reviews.…”

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“…Bouteska (2019) yang meneliti mengenai efek dari sentimen investor pada saat terjadinya restatement laporan keuangan di Amerika yang memiliki hasil bahwa saat terjadi suatu peristiwa seperti restatement ini, investor harus memperhitungkan bagaimana sentimen yang terjadi di pasar saat terjadinya peristiwa tersebut, karena pada saat terjadi sentimen yang tinggi dan terjadi penurunan laba saat restatement pengaruhnya terhadap harga saham sudah terjadi sebelum tanggal terjadinya restatement, sehingga pada event date, tidak terjadi pengaruh dari peristiwa restatement terhadap harga pasar. Fragoso et al, (2020) mengatakan bahwa peran analis keuangan di pasar sangat bisa diperdebatkan untuk andil dalam bergeraknya harga pasar pada saat bulan-bulan sebelum laporan restatement di terbitkan oleh perusahaan terkait.Analis keuangan seringkali memberikan rekomendasi, perkiraan laba/rugi setelah restatement, dan target harga pada bulan-bulan sebelum restatement, sehingga pasar dapat bergerak pada waktu sebelum tanggal penerbitan restatement. Terbukti dengan penelitian dari Santhikumar (2007), yang mengatakan bahwa analis keuangan seringkali memberikan informasi yang bias kepada investor sehingga pada saat mendekati tanggal penerbitan restatement, investor mencari pilihan investasi lain untuk memaksimalkan returnnya karena momen restatement sudah terjadi jauh sebelum tanggal penerbitannya.…”

“…Hallunovi (2017) juga mengatakan bahwa pergerakan pasar harga saham di pasar modal negara berkembang tidak memiliki tren yang jelas. Hal ini diakibatkan karena pasar modal di negara berkembang tidak memiliki kepastian yang dapat diberikan kepada investor, karena ekonomi negara yang belum stabil, masih sedikitnya tingkat investor dalam negeri (jumlah investor dalam negeri adalah 4.16 juta, sehingga pergerakan pasar masih dikuasai oleh asing), dan belum berfungsinya regulasi pemerintah untuk membuat informasi di pasar modal relevan untuk investor, sehingga terjadi banyak asimetri informasi di pasar (Fragoso et al, 2020).…”

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