Informed Trading and the Market Reaction to Accounting Restatements

• 成果类型: Article
• 署名作者: Badertscher, Brad A.; Hribar, S. Paul; Jenkins, Nicole Thorne
• 署名单位: University of Notre Dame; University of Iowa; Vanderbilt University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-10093
• 发表日期: 2011
• 页码: 1519-1547
• 关键词: information-content; DISCLOSURE LEVEL; earnings; cost; CONSEQUENCES; ISSUANCE; Managers; firm

摘要

We examine how informed trading activities affect the market reaction to accounting restatements. We find significantly less negative reactions to accounting restatements when managers are net purchasers of stock before the restatement, and significantly more negative market reactions when managers are net sellers. Similar patterns characterize corporate trading, where prior stock repurchases dampen negative reactions and prior equity issuances increase negative reactions to the restatement. We address the possibility of reverse causality in which informed trades are undertaken because of the expected market reaction by examining the difference between disclosed and non-disclosed trades, finding that the market reaction is concentrated in the disclosed trades. Our results are incremental to general return patterns associated with insider trading and corporate equity transactions, and hold after controlling for other determinants of the market reaction to restatements. Taken together, these findings suggest that investors use informed trading activities to help interpret and price accounting restatements.