As discussed in Section I, no prior study examines the relation between corporate governance mechanisms and the likelihood of an earnings restatement. A few studies examine the consequences of earnings restatements. William Kinney and Linda McDaniel analyze the stock price reaction for a sample of 73 firms that restated earnings between 1976 and They find that, on average, stock returns are negative between issuance of erroneous quarterly statements and its corrections. Mark Defond and James Jiambalvo study the characteristics of a sample of 41 companies that restated their earnings from 1977 to They find that restating companies had lower earnings growth before the restatement and were less.
