How firms respond to financial restatement : CEO successors and external reactions

By David Gomulya, Warren Boeker. 2014

144 citations recorded by the source corpus.

Although past studies have paid considerable attention to firms' reputations, few have investigated the actions that firms take following a reputation-damaging event. We identify firms involved in financial earnings restatements and examine whether naming a successor CEO with specific qualities serves to signal the seriousness of a firm's efforts to restore its reputation. Using theories of market signaling, we argue that attributes of successor CEOs significantly influence the reactions of key external constituencies. In particular, firms with more severe restatement tend to name successors who have prior CEO or turnaround experience and a more elite education. The naming of such successors results in more positive reactions from the stock market, financial analysts, and mass media. We argue that these attributes send messages to stakeholders and the broader public about the CEO's credibility and the firm's efforts.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/f6f0d29b50438c162c780c7c6f03695aaf5ae926

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Citations in the corpus

Toward a Configurational Perspective on the CEO (2016, background): “…Kochar, & Levitas, 1998), general investors (e.g., Grossman & Cannella, 2006; Y. Zhang & Wiersema, 2009), security analysts (e.g., Wiersema & Zhang, 2011), peers (e.g., Bednar, Love, & Kraatz, in press), and the media (e.g., Bednar, 2012; Bednar, Boivie, & Prince, 2013; Gomulya & Boeker, 2014).”
Signaler Credibility, Signal Susceptibility, and Relative Reliance on Signals: How Stakeholders Change their Evaluative Processes After Violation of Expectations and Rehabilitative Efforts (2017, background): “We elaborate more on the reasoning 4 Part of this sample overlaps with those used in two other studies (Gomulya & Boeker, 2014, 2015), but all papers substantially differ in their intents, arguments, and key variables.”
Analyzing Analyst Research: A Review of Past Coverage and Recommendations for Future Research (2018, background): “Utilizing institutional theory, they propose that because “analysts are legitimate arbiters qualified to assess a firm and its leadership” (Gomulya & Boeker, 2014: 1764), their evaluations can help restore a firm’s reputation with investors.”