@article{c4305d83cf6d4c688738f8ed20b0858e,
title = "Accounting Restatements and Corporate Cash Policy",
abstract = "Using a difference-in-differences approach, we find that the cash holdings of firms increase significantly after announcements of irregularity-related restatements. The increase is larger for firms with a higher demand for precautionary savings and is smaller for firms with less pronounced increase in shareholder control after the restatements. Investments and repurchases of irregularity firms become more sensitive to excess cash after the restatements. In addition, we find that the market value of cash holdings increases after restatements. Overall, the evidence suggests that strengthened shareholder control reduces cash holdings, but this effect is weaker than the increase in cash holdings due to exacerbated precautionary savings concerns. Our study contributes to the literature on the effect of financial reporting credibility on real corporate decisions.",
keywords = "cash holdings, financial reporting credibility, financial statement restatements, fund allocation, precautionary savings, real effect, shareholder control",
author = "Huili Chen and Zhihong Chen and Dhaliwal, {Dan S.} and Yuan Huang",
note = "Funding Information: The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Financial support from the Research Grants Council of Hong Kong (General Research Fund Grant, Project No. 15502614), Natural Science Foundation of Guangdong Province, China (Project 2016A030310417 and 2017A030310015), and China Postdoctoral Science Foundation (Project 2016M590791) is gratefully acknowledged. Funding Information: We thank Bharat Sarath (the editor in chief), Linda Myers (the editor), and two anonymous reviewers for many insightful comments and suggestions. We also thank Jeff Callen, Kevin Chen, Agnes Cheng, Qiang Cheng, Mingyi Hung, H?nock Louis, Grace Pownall, Joshua Ronen, Katherine Schipper, John Wei, and workshop participants at the Hong Kong University of Science and Technology, Tsinghua University, the 2016 European Accounting Association Annual Meeting, and the 2016 Journal of Accounting, Auditing and Finance Conference for their helpful comments and suggestions. The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Financial support from the Research Grants Council of Hong Kong (General Research Fund Grant, Project No. 15502614), Natural Science Foundation of Guangdong Province, China (Project 2016A030310417 and 2017A030310015), and China Postdoctoral Science Foundation (Project 2016M590791) is gratefully acknowledged. Publisher Copyright: {\textcopyright} The Author(s) 2017.",
year = "2020",
month = apr,
day = "1",
doi = "10.1177/0148558X17732654",
language = "English (US)",
volume = "35",
pages = "290--317",
journal = "Journal of Accounting, Auditing and Finance",
issn = "0148-558X",
publisher = "SAGE Publications Inc.",
number = "2",
}