Universal Journal of Accounting and Finance Vol. 9(6), pp. 1571 - 1581
DOI: 10.13189/ujaf.2021.090634
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Predicting Income-Decreasing Forced Financial Restatement


Intan Waheedah Othman 1,*, Richard Slack 2, Rebecca Stratling 2
1 Faculty of Accountancy, Universiti Teknologi MARA, Selangor Branch, Malaysia
2 Durham University Business School, Durham University, United Kingdom

ABSTRACT

This study explored the varied characteristics of misstatement firms, which serve as the foundation to develop a model that predicts income-decreasing forced restatement (IDFR). Multivariate logit regression was performed on 4,698 firm-years of Malaysian listed firms from 2002 to 2012. The results were tested for robustness using a stepwise logit model and a penalised likelihood logit model. Several factors, such as share price volatility, independent board of directors, company's internal fund, and political connection, emerged as the main predictors for IDFR. This study proposes a prediction model that synthesises financial and non-financial aspects in terms of scaled probability (F-score), which may function as a red flag of income-increasing misstatement firms that warrant further investigation.

KEYWORDS
Income-Decreasing Forced Restatement, Earnings Misstatement, Corporate Governance, Rare Event, Prediction Model

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Intan Waheedah Othman , Richard Slack , Rebecca Stratling , "Predicting Income-Decreasing Forced Financial Restatement," Universal Journal of Accounting and Finance, Vol. 9, No. 6, pp. 1571 - 1581, 2021. DOI: 10.13189/ujaf.2021.090634.

(b). APA Format:
Intan Waheedah Othman , Richard Slack , Rebecca Stratling (2021). Predicting Income-Decreasing Forced Financial Restatement. Universal Journal of Accounting and Finance, 9(6), 1571 - 1581. DOI: 10.13189/ujaf.2021.090634.