Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312602 
Authors: 
Year of Publication: 
2024
Citation: 
[Journal:] Schmalenbach Journal of Business Research (SBUR) [ISSN:] 2366-6153 [Volume:] 76 [Issue:] 4 [Year:] 2024 [Pages:] 613-639
Publisher: 
Springer, Heidelberg
Abstract: 
When the German financial reporting enforcement was introduced in 2004, the legislator chose an innovative approach: He combined a private enforcement institution with a governmental agency while sanctioning was carried out solely by publicly announcing identified accounting errors. Subsequently, investors were confronted with up to then unprecedented 'error announcements' from the enforcement system. For a sample of 213 announcements from 2006 to 2019, the paper analyzes the adaptation process of investors to this new information. While significant negative market reactions around the announcement dates can be found for the whole observation period, the results also show that the investors' views of the error announcements change over time. Especially in the early years, the observed market reactions are strongly linked to the impact of the accounting error on the firm's financial situation. This link weakens over time and factors related to the nature of the error become more important to investors. In particular, errors that are attributable to the unjustifiable application of professional judgment lead to significantly more negative effects.
Subjects: 
Accounting errors
Adaptation
Corporate governance
Enforcement
Event study
Exercise of discretion
FREP
JEL: 
G18
G41
M41
M42
M48
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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