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Information asymmetry and accounting restatement: NYSE-AMEX and NASDAQ evidence

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Abstract

We examine the impact of accounting restatement announcement on firms’ value and information asymmetry for both auction market (NYSE-AMEX) and dealer market (NASDAQ) using a public sample of restatement announcements from 1997 to 2005. In both markets, we document economically and significantly negative mean cumulative abnormal returns around the announcement dates. The restatements attributed to auditors are associated with more negative returns than those attributed to management and the SEC. However, there is no significant difference between market reactions arising from the core and non-core restatements. We also find a significant increase in volume, number of transactions, average order size, volatility, and various measures of spreads after the restatement announcement indicating that restatement announcements diminish company prospects and contribute to increased uncertainty and information asymmetry. Finally, we find that the information asymmetry in the NASDAQ market around the event date is less pronounced than in the NYSE-AMEX market.

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Notes

  1. The database is created by the United States General Accounting Office, Washington, DC 20548.

  2. We also document similar results for the other two measures of spread: quoted spread and effective spread. The results are not reported for space consideration but are available upon request.

  3. The results are available upon requests.

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Authors and Affiliations

  1. Department of Accounting and Finance, University of Massachusetts Dartmouth, Dartmouth, MA, USA

    Duong Nguyen & Tribhuvan N. Puri

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  1. Duong Nguyen
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  2. Tribhuvan N. Puri
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Correspondence to Duong Nguyen.

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Nguyen, D., Puri, T.N. Information asymmetry and accounting restatement: NYSE-AMEX and NASDAQ evidence. Rev Quant Finan Acc 43, 211–244 (2014). https://doi.org/10.1007/s11156-013-0370-z

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