THE ASSOCIATION BETWEEN MANDATORY FINANCIAL RESTATEMENTS AND THE TURNOVER OF FIRM EXECUTIVES

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Jo Ting Wei ORCID logo

https://doi.org/10.22495/cocv6i1c4p6

Abstract

Prior studies have examined the relationship between financial restatements and the turnover of firm executives and find that financial restatements lead to the turnover of firm executives. They often concern the above effects in developed countries such as America rather than those in developing countries. Besides, financial restatements externally prompted are more serious. However, past research little explores this type of financial restatement. Therefore, this study aims to examine the association between mandatory financial restatements and the turnover of firm executives—the chairman and the CEO in Taiwan. The findings show that there is positive relationship between mandatory financial restatements and the turnover of the CEO. However, we do not find there is positive association between mandatory financial restatements and the turnover of the chairman. The implications are as follows. As the CEO has power to make firm major decisions, including financial reporting, he should be responsible for financial restatements. The chairman is the leader of a firm. Replacing the chairman may significantly affect firm normal operation. Hence, firms are not easily to replace the chairman unless there is concrete evidence showing that he should be responsible for the financial restatements.

Keywords: Financial Restatements, Turnover, Executives

How to cite this paper: Wei, J. T. (2008). The association between mandatory financial restatements and the turnover of firm executives. Corporate Ownership & Control, 6(1-4), 467-474. https://doi.org/10.22495/cocv6i1c4p6