Title
The Long-Term Performance and Failure Risk of Firms Cited in the US SEC's Accounting and Auditing Enforcement Releases
Publication Date
9-1-2011
Abstract
We investigate 239 firms cited in the SEC's Accounting and Auditing Enforcement Releases (AAERs). We document significantly negative abnormal operating performance (measured using both cash-flow-based and earnings-based metrics) in the second and third years following AAERs. We also detect significantly negative abnormal stock returns in up to three years following AAERs. We further find that AAER firms are more likely to fail in the post-AAER period. Taken together, our findings suggest that the negative implications of an AAER citation resulting from egregious financial reporting violations can be long lasting and influence various facets of firm performance and survivability. © 2011 Blackwell Publishing Ltd.
Publication Title
Journal of Business Finance and Accounting
Volume
38
Issue
7-8
First Page
813
Last Page
841
DOI
10.1111/j.1468-5957.2011.02249.x
Recommended Citation
Reprinted from INTERNATIONAL ACCOUNTING IN THE 21ST CENTURY, A. Solovyov and I. Kuznetsov, eds., Nova Science Publishers, 2010, pp.305-308. ISBN:978-1-60876-018-3
