Riding a Tiger without Being Eaten - RePub - Erasmus Universiteit ...

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Chapter 5 – Overall Conclusions and Discussion 244 5.1 Introduction 244 5.1.1 Overview of Three Studies 245 5.1.2 Answers on Principal Research Questions 246 5.2 Key Findings from Our Studies 250 5.3 Summary of Findings 263 5.4 Discussion Themes 266 5.4.1 What Blinds Gatekeepers during Restatements? 266 5.4.2 How can Gatekeepers Avoid Being Blinded and Captured by the Dominant Logic of Their Profession? 267 5.4.3 How to Improve Inter-Gatekeeper Cooperation? 269 5.4.4 CEO Power in Restatement Situations and Independent Board ‘Capture’ 271 5.5 Theoretical Relevance 275 5.6 Managerial Implications 280 5.7 Limitations of This Study 284 5.8 Agenda for Future Research 287 5.9 Concluding Remarks 291 References 292 Appendices 310 Appendix 1.1 Materiality Considerations 310 Appendix 1.2 The Subprime Mortgage Crisis and Restatements 312 Appendix 2.1 Timelines Freddie Mac and Nortel 314 Appendix 2.2 Coding Scheme 316 Appendix 2.3 Overview of Coding Data and Results 317 Appendix 3.1 Analysts Survey 320 Appendix 3.2 Analysts’ Survey – Bridge to Constructs 350 Appendix 3.3 Partial Least Squares Path Model 353 Samenvatting (Dutch Summary) 355 About the Author 362 ERIM PhD Series 363 15
16 List of Figures Figure 1.1 Number of Restatements: 1997-2006 64 Figure 1.2 Restatement Announcement Returns and Market Returns Last Decade 64 Figure 1.3 Average Returns for Fraud and Revenue Restatement Announcement 65 Figure 1.4 Average Assets for Restating and Compustat Companies 65 Figure 1.5 Reputation Analyses BP, Credit Suisse and General Motors 72 Figure 1.6 Study Overview 80 Figure 1.7 Simplified Typology of Restatements 83 Figure 2.1 Perceived Intent and Distortion as Two Dimensions of Financial Restatements 96 Figure 2.2 Issues and Responses with Respect to Perceived Intent and Perceived Distortion 97 Figure 2.3 Issues Influencing Perceived Intent and Distortion 104 Figure 2.4 Responses to Alleviate Perceived Intent and Distortion 110 Figure 2.5 Content of Media Reports for Freddie Mac and Nortel 123 Figure 2.6 Sample Graph of Content Codes for the Freddie Mac Case 124 Figure 2.7 Sample Graph of Content Codes for the Nortel Case 125 Figure 3.1 Average Assets for Restating and Compustat Companies 134 Figure 3.2 Research Model Study 2 146 Figure 3.3 Perception of the Analyst: Period A with and without Hindsight 171 Figure 3.4 Perception of the Analyst: Period A and B without Use of Hindsight 172 Figure 3.5 Perception of the Analyst: Period B (beginning and end) without Use of Hindsight 172 Figure 3.6 Partial Least Squares Model of the Influence of Severity 209 Figure 3.7 Influence of Earnings Management Pressures for Different CEO Behaviours 213 Figure 3.8 Influence of Task Challenges for Different CEO Behaviours 213 Figure 5.1 Extrapolation of Findings and Other Research 249 Figure 5.2 Analysts Only: Normal Disclosure – No Restatement - Visualization 264 Figure 5.3 Analysts Only: Restatement Hits – Capture and Biases - Visualization 265
Page 1 and 2: FRED H.M. GERTSEN Riding a Tiger wi
Page 4 and 5: Riding a Tiger without Being Eaten
Page 8 and 9: Acknowledgments Boundary spanning c
Page 10 and 11: neighbours with Thomson Financial (
Page 13 and 14: 12 Table of Contents Acknowledgment
Page 15: 14 3.2.2 Nature of Analysts’ Expe
Page 19 and 20: 18 List of Tables Table 1.1 Inciden
Page 22 and 23: Introduction and theoretical backgr
Page 25 and 26: 24 Chapter 1 1.1 Introduction and H
Page 27 and 28: 26 look after the interests of stak
Page 29 and 30: 28 and pride. Mandeville writes:
Page 31 and 32: 30 associated with their views on r
Page 33 and 34: 32 period adjustment by restating t
Page 35 and 36: 34 by 71 per cent on average (as me
Page 37 and 38: 36 Next to these reports, which wer
Page 39 and 40: 38 the new millennium, considered p
Page 41 and 42: 40 cent in 2005. Also in the same p
Page 43 and 44: 42 1997-2006’ (Scholz, 2008); com
Page 45 and 46: 44 Lieberman put it in an October 2
Page 47 and 48: 46 major accountability breakdowns
Page 49 and 50: 48 1.3 Review of Academic Studies i
Page 51 and 52: 50 measured in basis points over Li
Page 53 and 54: 52 of poor governance have been add
Page 55 and 56: 54 accurate corporate financial sta
Page 57 and 58: 56 1.3.6 restatements and contagion
Page 59 and 60: 58 after having been dismissed, the
Page 61 and 62: 60 Wall Street Journal was the whis
Page 63 and 64: 62 CEO job demands, and factors rel
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66 table 1.1 iNcideNce oF restateme
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68 (Wiesenfeld, Wurthmann, & Hambri
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70 personality traits that people a
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72 Figure 1.5 reputatioN aNalyses b
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74 surface. A celebrity CEO receive
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76 Financial statements also serve
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78 For our purposes, important driv
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80 Figure 1.6 study overview backgr
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82 Therefore, our first research qu
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84 of senior management, independen
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86 American Institute of Certified
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88 and explain the context of the C
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90 Chapter 2 Study 1: Restatement C
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92 • Effects on market capitaliza
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94 2.2 Theoretical Framework: Class
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96 Figure 2.1 perceived iNteNt aNd
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98 2.3 Methods We developed our cla
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100 memos in various levels. This s
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102 at the beginning of the crisis.
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104 Figure 2.3 issues iNFlueNciNg p
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106 leads to a questioning of the c
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108 communication most likely leads
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110 able to withstand such mounting
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112 to errors made in the past on s
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114 What is remarkable is the relat
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116 Anderson, Mansi & Reeb, 2004).
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118 was executive responsibility fo
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120 Compliance with standards and c
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122 and standalone companies…, 12
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124 to provide an estimate of the e
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126 Although Freddie Mac’s restat
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128 is too high for most executives
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130 2.6 Conclusions and Discussion
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132 Chapter 3 Study 2: Analysts’
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134 Compustat database. However, st
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136 3.2 Theoretical Framework and P
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138 employers and anyone who uses a
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140 marketplace. Contrary to other
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142 Stracca (2004: 383) notes: A si
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144 In determining financial report
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146 other, the degree to which anal
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148 Conversely, regarding the secon
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150 incentives from option compensa
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152 d. There is excessive pressure
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154 3.3.4 HyPotHeses ceo dominance
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156 Hambrick (2007) notes that this
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158 H7a: The more competent the ana
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160 high degree of pressure on the
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162 reporting. Their research exten
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164 3.4 Analysts’ Survey Design a
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166 of significant restatement comp
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168 Therefore, it was to be expecte
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170 covering a part of the model as
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172 (which we label Period B). Howe
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174 A six-point Likert-type scale w
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176 continuAtion tABle 3.1 reliABil
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182 were posed for the restatement
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184 resolution period. Therefore, w
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186 to which the CEO provided adequ
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188 Earnings Management Pressures T
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190 announcement. Nevertheless, we
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192 table 3.5 Factor loadiNgs bouNd
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194 items loaded on the factors rep
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196 3.5 Analysis of Survey Results
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198 In Table 3.9, it can be seen th
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200 table 3.10 comparisoN oF meaNs
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table 3.11 comparisoN oF meaNs For
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204 blame taking behaviour, or blam
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206 the CEO do not have a significa
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208 Influence of restatement severi
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210 table 3.17 meaNs oF coNstructs
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212 table 3.18 overview oF hypothes
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214 Regarding the other factors tha
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216 measurement by the same instrum
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218 Chapter 4 Study 3: Interviews w
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220 functioning of a CEO. We will c
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222 We split the factors for this i
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224 and Kubik (2003) find that job
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226 4.3 Methods The 23 in-depth int
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228 4.3.2 Procedures and interview
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230 You were involved with the (Com
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232 4.4 Data Analysis and Empirical
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234 4.4.3 interview results and tab
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236 CEO Qualities (Q5 How did the f
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238 Surprised about restatement (Q
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240 Red flags (Q 13 In hindsight, w
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242 4.6 Conclusions and Discussion
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244 Chapter 5 Overall Conclusions a
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246 avoid reputation damage, both a
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248 This chapter will continue as f
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250 5.2 Key Findings from Our Studi
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252 and gatekeepers (including anal
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254 of Investigations, 2002) and Po
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256 prior awareness of all of the i
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258 Legislators and regulators have
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260 while negative events are attri
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262 1. Encourage companies to provi
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264 Figure 5.2 aNalysts oNly: Norma
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266 5.4 Discussion Themes 5.4.1 wHa
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268 profession management aspects,
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270 with standards or procedures. A
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272 Corporate dishonesty has also b
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274 information they receive from e
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276 and contractual parameters of t
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278 from overconfidence (Daniel et
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280 5.6 Managerial Implications We
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282 • Convening bilateral and/or
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284 5.7 Limitations of This Study F
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286 This brings us to the next limi
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288 crisis they have suggested how
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290 AICPA auditing standards board
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292 References Abarbanell, J., & Le
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294 Berens, G., van Riel, C., & van
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296 Coffee Jr., J. 2001. The Acquie
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298 Efendi, J., Srivastava, A., & S
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300 Glaser, B., & Strauss, A. 1967.
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302 Huron Consulting Group. 2005. 2
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304 Loebbecke, J., & Willingham Jr.
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306 Prentice, R. 2007a. Ethical Dec
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308 Sun, P., & Zhang, Y. 2006. Is T
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310 Appendices Appendix 1.1 Materia
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312 Appendix 1.2 The Subprime Mortg
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314 Appendix 2.1 Timelines Freddie
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316 Appendix 2.2 Coding Scheme OPEN
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318 codiNg scores by positive aNd N
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320 Appendix 3.1 Analysts Survey Ap
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322 Appendix 3.1 Analysts Survey
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350 Appendix 3.2 Analysts’ Survey
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352 Construct Item number Item name
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Samenvatting ‘Financial Statement
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gebaseerd op historische dataverzam
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Earnings Management Pressures & Job
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Op basis van literatuur studie over
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Erasmus Research Institute of Manag
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Damen, F.J.A., Taking the Lead: The
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Heuvel, W. van den, The Economic Lo
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Le-Duc, T., Design and Control of E
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Noeverman, J., Management Control S
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Six, F.E., Trust and Trouble: Build
Page 376:
Watkins Fassler, K., Macroeconomic
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