Discussion of “The Effect of Accounting Restatements on Earnings Revisions and the Estimated Cost of Capital”

Discussion of “The Effect of Accounting Restatements on Earnings Revisions and the Estimated... The Hribar and Jenkins study (2004, this issue) investigates the effect of accounting restatements on firms' cost of equity capital. The authors document that the loss of market value associated with restatement announcements is attributable not only to a downward revision in expected future earnings but also to an increase in implied cost of capital. This finding is consistent with the conjecture that restatements lead to increased investors' uncertainty about management credibility and competence, as well as to concerns about overall earnings quality. My discussion evaluates the motivation for the research question, addresses a number of key research design issues, particularly the estimation of implied cost of capital, and offers some suggestions for future research. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “The Effect of Accounting Restatements on Earnings Revisions and the Estimated Cost of Capital”

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Kluwer Academic Publishers
Copyright © 2004 by Kluwer Academic Publishers
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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