Corporate Governance Ratings and Financial Restatements : Pre and Post Sarbanes-Oxley Act

Content Provider	Semantic Scholar
Author	Abdolmohammadi, Mohammad Read, William J. L.
Copyright Year	2010
Abstract	The overall objective of this paper is to investigate the relation between corporate governance ratings and the incidence of financial restatement. Corporate governance ratings, such as those issued by RiskMetrics Group (RMG), formerly Institutional Shareholder Services, offer an unbiased evaluation of corporate governance and can play an important role in shareholder monitoring of management practices. Governance ratings, which are generated from reviews of public and private corporate information as well as from interviews with top executives and independent trustees, can be influential with investors on matters related to election of directors and executive compensation. Corporate governance scores also can influence credit rating services thereby directly impacting cost of capital. In this study, we identify 150 firms that restated their 2003 annual financial statements, and are included in a database of corporate governance ratings developed by RMG. We use Compustat to generate a control sample of firms, which also are included in the RMG database, matched with the test firms on the basis of four-digit Global Industry Classification Standard (GICS), year, auditor type (Big-Four), and size. We compare the governance ratings of the two samples for the restated year (2003) and for each of the two years immediately following the restated year. We also examine changes in corporate governance for new test and control
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Alternate Webpage(s)	http://www.bus.lsu.edu/accounting/faculty/lcrumbley/jfia/Articles/FullText/2010v2n1a3.pdf
Alternate Webpage(s)	http://www.bus.lsu.edu/accounting/faculty/lcrumbley/jfia/Articles/Abstracts/abs_2010v2n1a3.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article