Investor reaction to accounting misstatements under IFRS: Australian evidence
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Goodwin, John and Atılgan, Yiğit and Şimşir, Şerif Aziz and Ahmed, Kamran (2018) Investor reaction to accounting misstatements under IFRS: Australian evidence. (Accepted/In Press)
We examine the investor reaction to misstatement news for Australian listed firms from
2006 to 2013. We find 4.1% of firm-years have a misstatement and 79% of misstatements
are disclosed initially only in the periodic filings (stealth misstatements). We find no
investor reaction for the average misstatement, reactions of between -2.3% and -2.8% (-
1.5% and -1.7%) for misstatements that reduce prior-period earnings or equity (affect
revenue), and reactions of between -1.3% and -2.7% for non-stealth misstatements.
Investor reactions are more negative for non-stealth misstatements that reduce prior period
earnings or equity than to stealth misstatements.
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