The market effects of the German two-tier enforcement of financial reporting.

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URI: http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-67691
http://hdl.handle.net/10900/47996
Dokumentart: ResearchPaper
Date: 2012
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 334
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Bilanz , Rechnungslegung
Other Keywords:
Accounting , Financial reporting
License: Publishing license including print on demand
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Abstract:

This study contributes to the literature by analyzing the potential market penalties due to financial reporting violations detected by the German enforcement regime. Event study results provide evidence that official error announcements lead to significant negative (cumulative) abnormal returns. Investigating the variation between the cumulative abnormal returns, the cross-sectional analysis indicates that companies are able to dilute the (negative) capital market reaction by releasing other (positive) information simultaneously. The negative stock market reaction is less pronounced for profit-decreasing errors. The cumulative abnormal returns are more negative for companies that have been listed for a longer period of time.

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