بازگویی حسابداری و سیاست پولی شرکت Accounting Restatements and Corporate Cash Policy

Introduction In a perfect capital market, firms do not need to reserve cash because they can raise external capital when required. Due to market frictions including information asymmetry and moral hazard, however, raising external capital from the spot market is costly (Jensen & Meckling, 1976; Myers & Majluf, 1984). This creates a ‘‘precautionary savings motive’’ to hoard cash as a safeguard against future cash flow shortfalls (Holmstrom & Tirole, 1998; Keynes, 1936). In addition, self-interested managers have incentives to hoard excess cash for private benefits (Dittmar, Mahrt-Smith, & Servaes, 2003). A fundamental objective of financial reporting is to reduce information asymmetry and facilitate the monitoring of the management. However, little empirical research investigates how financial reporting quality affects a firm’s cash policy. Thus, this study examines the change in corporate cash holdings after accounting restatements. On one hand, perceived information asymmetry between managers and outside investors increases after a restatement can decrease financial reporting credibility (Chen, Cheng, & Lo, 2014). Thus, raising future external financing from the spot market becomes more costly, and the value of cash reserves as insurance against future cash shortfalls is magnified. This suggests that firms should reserve more cash after restatements. On the other hand, because restatements provide an adverse signal to market participants, managers are likely to be subjected to more intensive market scrutiny. In addition, internal and external governance mechanisms are strengthened after restatement announcements (e.g., Cheng & Farber, 2008; Farber, 2005). Consequently, managers may reduce cash holdings because the private benefits of holding excess cash are lower. Thus, accounting restatements result in conflicting incentives with regard to corporate cash holdings, and the combined effect is ultimately an empirical question. To test the effect of accounting restatements on corporate cash policy, we identify a sample of 949 firms that announced accounting restatements from 1997 through 2006 (GAO, 2003, 2006). Following Hennes, Leone, and Miller (2008), we partition the restatements into those related to accounting irregularities and those related to errors. Our final sample contains 270 irregularity-related restatements and 679 error-related restatements. To ensure that any change in cash holdings after a restatement is not driven by an intertemporal trend in cash holdings (Bates, Kahle, & Stulz, 2009), we match each restatement firm with a non-restatement firm based on a propensity score, and we conduct a difference-indifferences test. We include a number of covariates that are associated with accounting restatements and corporate cash holdings to estimate the propensity score (Roberts & Whited, 2013).