Coming forward

The effects of social and regulatory forces on the voluntary restatement of earnings subsequent to wrongdoing

Michael D. Pfarrer, Ken G. Smith, Kathryn M. Bartol, Dmitry M. Khanin, Xiaomeng Zhang

Research output: Contribution to journalArticle

41 Citations (Scopus)

Abstract

We investigate the effects of social and regulatory forces on a firm's decision to disclose past wrongdoing by voluntarily restating its earnings. With an eight-year sample of more than 2,500 public firms, including 170 voluntary restaters, we find that firms are more likely to voluntarily restate their earnings in response to informal social pressures from other firms in their industry and less likely to do so in response to formal regulatory sanctions. We also show that the impact of these forces varies with firm status. We contribute to corporate governance and public policy research that examines the effectiveness of "hard" versus "soft" deterrence measures on firm compliance.

Original languageEnglish
Pages (from-to)386-403
Number of pages18
JournalOrganization Science
Volume19
Issue number3
DOIs
Publication statusPublished - May 2008
Externally publishedYes

Fingerprint

Industry
Restatements
Wrongdoing
Compliance
Social pressure
Corporate governance
Sanctions
Policy research
Public policy
Deterrence
Public firm

Keywords

  • Corporate compliance
  • Corporate corruption
  • Corporate deterrence
  • Corporate governance
  • Earnings restatements
  • Informal versus formal sanctions
  • Public policy
  • Self-regulation
  • Voluntary disclosure

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Organizational Behavior and Human Resource Management

Cite this

Coming forward : The effects of social and regulatory forces on the voluntary restatement of earnings subsequent to wrongdoing. / Pfarrer, Michael D.; Smith, Ken G.; Bartol, Kathryn M.; Khanin, Dmitry M.; Zhang, Xiaomeng.

In: Organization Science, Vol. 19, No. 3, 05.2008, p. 386-403.

Research output: Contribution to journalArticle

Pfarrer, Michael D. ; Smith, Ken G. ; Bartol, Kathryn M. ; Khanin, Dmitry M. ; Zhang, Xiaomeng. / Coming forward : The effects of social and regulatory forces on the voluntary restatement of earnings subsequent to wrongdoing. In: Organization Science. 2008 ; Vol. 19, No. 3. pp. 386-403.
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