Date Available
4-25-2016
Year of Publication
2016
Degree Name
Doctor of Philosophy (PhD)
Document Type
Doctoral Dissertation
College
Business and Economics
Department/School/Program
Business Administration
First Advisor
Dr. Hong Xie
Abstract
This paper examines the determinants of firms’ non-reliance judgment and the effect of restatements disclosure venue choice on future litigation risk. The Securities and Exchange Commission (SEC) requires firms to disclose any error that will undermine investors’ reliance on previously issued financial statements in Item 4.02 of Form 8-K starting on August 23, 2004. The requirements for non-reliance judgments lack clear guidelines; raising concerns that firms are cloaking errors and mistakes through opaque disclosure venues instead of the more prominent Form 8-K.
This paper is the first to investigate the quantitative and qualitative criteria that firms use for non-reliance judgments and estimate the likelihood of specific disclosure venue choice. Applying this estimation into securities class-action litigation setting with controls for restatement characteristics and potential self-selection biases, I find that a more prominent restatement disclosure venue is associated with higher future litigation risk.
This finding provides a plausible explanation for the current popularity of so-called ‘stealth restatements.’ These findings are robust to the exclusion of a transition period of the new regulation, firms with multiple restatements, and dismissed lawsuits.
Digital Object Identifier (DOI)
http://dx.doi.org/10.13023/ETD.2016.181
Recommended Citation
Chung, Keunho Philip, "FIRMS’ NON-RELIANCE JUDGMENT, RESTATEMENT VENUE CHOICE, AND LITIGATION RISK" (2016). Theses and Dissertations--Accountancy. 7.
https://uknowledge.uky.edu/accountancy_etds/7
