The value relevance of accounting:: The rest of the story

When a story appears in the media reporting ‘restatements, frauds, and investigations,' how do reported dollar effects relate to value? Declines to about half the pre-event levels are observed, even when the overall market has been increasing significantly. The declines in price (cum dividend) are significantly associated with the amount of the event's effect, as reported in the media, when concurrently controlling for earnings, industry, market, and scalar (book value) effects. The Value Line evaluations of these companies' safety, financial strength, price stability, and technical ranking all deteriorate significantly post-event. Managers evaluating their accounting and controls should consider such consequences.