Market effects associated with different financial restatements announcement strategies by Canadian firms

Canadian firms generally use one of two different announcement strategies when they detect the possible need to issue financial restatements; namely: single-announcement restatements (directly uploading and disclosing the financial restatements) and multiple-announcement restatements (initially announcing the possibility of accounting problems through press releases or firm reports before the later issue of the final restatements). We find that error-related single-announcement financial restatements are associated with significant negative market impacts in a two day event window [0, +1]. The median idiosyncratic volatility associated with error-related single-announcement restatements increases significantly following the announcements. For multiple-announcement restatements we observe significant market impacts at the intention announcement day and additional market impacts prior to but not on the official restatement dates. In the in-between period after the intention to restate is announced, bid-ask spreads increase and trading volumes, trading values and the idiosyncratic volatilities decrease significantly. After the official restatement is announced, trading volumes, trading values and idiosyncratic volatilities increase significantly. We observe higher total market impacts for multiple versus single announcement financial restatements.