Institutional Investors and Accounting Restatements

摘要: This paper examines how institutional investors respond to accounting restatements. We show that transient investors, defined as institutions with shorter investment horizons and higher portfolio turnover, significantly reduce their holdings in a restating firm at least one quarter prior the of restatement. result holds after controlling for factors such return momentum, unexpected earnings, size, book-to-market, weight institution. find no evidence other types adjust advance restatements, although all restatement announcement. also market reaction restatements firms high ownership is more strongly associated diminished company prospects (measured revisions analyst forecasts) increased uncertainty changes forecast dispersion) relative low ownership. Finally, momentum size effects, we trade earlier than individual within quarter. Overall, our results suggest sophistication enables them anticipate potential problems downwards