재작성된 재무제표의 정보효과에 관한 연구

This study examines whether the market negatively reacts to the restatement of financial statements. Further, this study investigates whether the market reaction is more negative when the restatement is due to prior-period error corrections as opposed to accounting policy changes and when the restatement affects core income. Recently many well-known multinational companies such as Xerox, WorldCom, and Enron wrote off billions of dollars by restating prior-period financial statements, which raised questions about the credibility of financial reporting. Consistent with such concerns, prior research conducted in the US documents that the market negatively reacts to restatement announcements, which leads to increases in firms’ costs of capital (Anderson and Yohn 2002; GAO 2002; Wu 2002; Palmrose et al. 2004; Palmrose and Scholz 2004; Hribar and Jenkins 2004; GAO 2002). Great concerns over restatements to correct prior-period errors led to regulatory actions in the US. The 2002 Sarbanes-Oxley Act prescribes that CEO and CFO shall reimburse the firm for any bonus or other incentive(or equity)-based compensation if the firm restates financial statements due to the material errors as a result of misconduct (SEC. 304). Furthermore, the Auditing Standard issued by the Public Company Accounting Oversight Board (PCAOB) mentions that restating financial statements due to errors is regarded as a material deficiency in internal control for financial reporting (PCAOB Auditing Standard No. 2). These regulatory actions reveal the US regulators' stance on the restatement--that it should be minimized. The Korean accounting standards require that financial statements be restated for prior-period errors and accounting policy changes for the fiscal years starting after 1998 and 2001, respectively. As a result, many Korean companies have restated financial statements to write off overstated net assets in prior financial statements. Moreover, in a recent rule-making the Korea Financial Supervisory Commission (FSC) even facilitates the restatement of financial statements in order to give firms opportunity to rectify prior-period errors. If the restatement of financial statements due to errors is detrimental to market value of the firm, the Korea FSC's rule-making may not be in line with the interest of investors. Hence, our study examines whether the restatement of financial statements impairs the credibility of financial reporting, thereby having negative impact on stock prices in Korea. We find negative market reactions to restated financial statements. In addition, the results reveal that the more negative reaction is associated with the restatement due to error corrections, the income-decreasing restatement, and the more material restatement having large effects on income. However, we find no association between the negative market reaction and the restatement involving core accounts. Also, the negative market reaction to the restatement does not increase in the pervasiveness (number of accounts affected) and persistence (number of financial statements restated for a particular firm) of the restatement. These results suggest that while investors react to the restatement itself, they do not fully incorporate detail information of the restatement into stock prices. This might be due to the short history of the restatement in that the restatement of financial statements has been enforced relatively recently. Finally, the negative market reaction to the restatement is observed only for firms listed on the Korea Security Exchange (KSE). There is no significant market reaction to the restatement by firms traded in the Kosdaq market. In general the accounting information for Kosdaq firms is perceived as less credible than that for KSE firms. Thus, it appears that investors in the Kosdaq market do not consider even the restatement itself in valuing firms.