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Accounting Restatement and Investors' Size
Sebahattin Demirkan,
University of Texas at Dallas
ABSTRACT. I examine small and large investors’ differential response to restatement announcements. Large investors do not trade as much as small investors around the announcements. Moreover, small investors’ trading volume differs around the announcement of restatements according to the prompters of restatements such as Company, FASB or SEC, but not according to reasons of restatements such as revenue recognition, restructuring or cost/expense. Big investors’ trading volume around the announcements differs according to both prompters and reasons of restatements. This documents differential interpretations of large and small investors to the same public announcement with additional information. Large investors, anticipating potential problems, take action before the announcements of restatements and engage in more rational trading around the announcements. Demski and Feltham (1994) theoretical study’s result about investors trading behaviour around public announcement window is supported.
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