Document Type

Article

Article Version

Post-print

Publication Date

5-2019

Abstract

We investigate the dynamic nature and temporal daily changes in systematic (beta), as well as idiosyncratic and total risk around restatement announcements. We find that beta increases by 51% at restatement announcement but it reverts to the pre-restatement level within 1 month. However, idiosyncratic risk experiences a longer-term increase of approximately 20% following a restatement. Cross-sectional analysis shows that the results are more pronounced with restatements associated with irregularity. Overall, our findings suggest that risk components are time-varying with the systematic component rapidly mean-reverting but the idiosyncratic component experiencing a longer-term increase.

Comments

Copyright © 2019, Springer Nature

This is a post-peer-review, pre-copyedit version of an article published in Review of Quantitative Finance and Accounting. The final authenticated version is available online at: http://dx.doi.org/10.1007/s11156-019-00825-4.

Publication Title

Review of Quantitative Finance and Accounting

Published Citation

Bardos, Katsiaryna Salavei, Brandon N. Cline, and Gregory Koutmos. "Risk dynamics around restatement announcements." Review of Quantitative Finance and Accounting (2019): 1-35. https://doi.org/10.1007/s11156-019-00825-4

DOI

10.1007/s11156-019-00825-4

Peer Reviewed

Available for download on Monday, June 01, 2020

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