An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Judy K Land
North Carolina Central University

Abstract: This paper examines whether specific characteristics of restatements are likely to increase the likelihood of a change in top management, and whether the severity of a restatement matters in predicting CEO turnover. The sample includes 256 firms that restated earnings in the years 1996-1999, with 45% of these firms experiencing turnover within a year of the restatement. The results indicate that there is an association between the severity of restatement and the probability of turnover. Other results are that revenue recognition related restatements and the market reaction to restatement announcements are likely to increase the probability of turnover for a firm. The paper supports the findings in Desai, Hogan and Wilkins (2005) as well as finding evidence contrary to earlier papers in the area. In addition, the paper shows that certain restatement characteristics such as the degree and type of restatement are associated with CEO turnover.

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