Required Disclosure Notes

Investors view misstatements (especially the

fraudulent ones) very negatively

Research shows that following revelation of misstatements:

▪ the stock price goes down sharply (Palmrose et al. 2004)
▪ and investors’ trust in the company’s future disclosure goes
down (Chen et al.2014)
▪ Companies often fire managers and auditors to regain investor
trust (Hennes et al. 2008, Chen et al.2014, Chakravarthy et al.
2014)

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