Department of Economics and Business Economics

Bank Restatements and Financial System Stability

Research output: Working paperResearch

This paper investigates whether and how restatements in banks affect financial system stability. I find that banks contribute more to systemic risk up to three quarters after a restatement, and that the restatement effect on systemic risk is larger for banks that (i) are very interconnected to other banks, (ii) rely heavily on short-term funding, and (iii) experienced severely negative market reactions to
the restatement. These findings suggest that the uncertainty following bank restatements spills over to the system mainly through the overlapping claims between financial institutions (liability side), not through positively correlated risk factors on banks’ balance sheets (asset side).
Original languageEnglish
Place of publicationAarhus
PublisherDepartment of Economics and Business Economics, Aarhus University
Number of pages40
DOIs
Publication statusPublished - 2017

    Research areas

  • Earnings restatements; banks and banking; systemic risk; accounting quality.

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ID: 108254839