The impact of accounting restatements on corporate innovation strategy |
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Authors: | Ning Jia |
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Affiliation: | Weilun Building 201F, School of Economics and Management, Tsinghua University, Beijing 100081, PR China |
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Abstract: | This study examines the effect of accounting restatements on corporate innovation strategy. Using a sample of restating firms and propensity-score-matched non-restating firms from 2000 to 2009, we find that, after restatements, restating firms experience a greater increase in exploratory innovation and a greater reduction in exploitative innovation compared to non-restating firms. These results suggest that restating firms are associated with an increased risk appetite as managers believe the upside potential may yield corporate improvement. The results also differ between fraudulent and non-fraudulent restatements, and among restatements of varying severity. The results of this study shed light on a previously unexplored consequence of accounting restatement and highlight its real impact on corporate business strategy. |
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Keywords: | Accounting restatements Innovation strategy Exploration Exploitation M41 O31 L20 |
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