The Restating of Financial Statements by REITs

• Autores: John C. Adams, D.K. Hayunga, Stephanie J. Rasmussen
• Localización: Journal of Accounting Auditing and Finance, ISSN-e 2160-4061, ISSN 0148-558X, Vol. 32, Nº 3, 2017, págs. 350-371
• Idioma: inglés
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• Resumen

  • This article is the first to examine financial restatements by real estate investment trusts (REITs). We provide a descriptive breakdown of the underlying causes of REIT restatements as well as overall and subsample analyses of stock market reactions to restatements from 2000 to 2011. REIT restatements occur for a large variety of accounting issues with the most common being expense-related (e.g., leases, depreciation). We find that the average market reaction for REIT restatements is negative 0.63%, which is less negative than non-REIT restatements. Further investigation reveals that a significant portion of REIT restatements result in large positive or negative returns, the most extreme of which appear to be a result of both the restatement and other news released simultaneously. Cross-sectional analysis shows that the most important determinant of restatement cumulative abnormal returns (CARs) is whether the restatement is a result of Securities and Exchange Commission (SEC) comment letters or involves an investigation by regulators, which lowers the CAR by 5.64%. Overall, the findings suggest that REIT restatements occur for a variety of reasons, and REIT investors place high value on quality financial statements.