Publication Type

Journal Article

Version

publishedVersion

Publication Date

4-2017

Abstract

Prior studies have shown that a firm’s violation of expectations might lead to less favorable evaluations of that firm by stakeholders. However, the literature has been silent on whether and how the process by which stakeholders evaluate a firm could change subsequent to the violation. Drawing from signaling and screening theory, we examine how evaluative processes might change in the context of financial restatements. We find that investors appear to shift their relative reliance on particular signals in determining a firm’s stock price following an earnings restatement. These changes are at least partly reversed following the replacement of an incumbent CEO. We further find that these evaluative changes vary depending on the severity of the violation.

Keywords

CEO replacement, financial statementl misconduct, reputation repair, signaling

Discipline

Human Resources Management | Leadership Studies | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Academy of Management Journal

Volume

60

Issue

2

First Page

554

Last Page

583

ISSN

0001-4273

Identifier

10.5465/amj.2014.1041

Publisher

Academy of Management

Copyright Owner and License

Publisher

Additional URL

https://doi.org/10.5465/amj.2014.1041

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