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

doi:10.1287/orsc.1070.0323

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

Graduate School of Business

Research output: Contribution to journal › Article › peer-review

49 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 language	English
Pages (from-to)	386-403
Number of pages	18
Journal	Organization Science
Volume	19
Issue number	3
DOIs	https://doi.org/10.1287/orsc.1070.0323
Publication status	Published - May 1 2008

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

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

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10.1287/orsc.1070.0323

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