Court Stringency and Voluntary Restatements

2018-03-15

Topic£ºCourt Stringency and Voluntary Restatements

Speaker£ºZhen Lei£¬The Hong Kong Polytechnic University

Site£ºB226

Time£ºMarch 23,2018 9:30am

Abstract£ºThis paper studies the effect of district court stringency on firms’ propensity to admit their misreporting using different samples of misstated firms. We find robust evidence that firms headquartered in high dismissal rate (lenient) court jurisdictions are more likely to make voluntary restatements. Exogenous shock from the Supreme Court’s Tellabs decision confirms this effect. We consider a range of explanations and find the results are most easily explained by managers using court dismissal rates as a heuristic when making voluntary restatement decisions. Our evidence sheds light on the complicated effect of legal environment on financial reporting quality.

Introduction to the speaker£ºZhen Lei is a Ph.D. candidate at the School of Accounting & Finance, Hong Kong Polytechnic University. His research interest covers asset pricing, financial reporting and litigation risk