Financial Statement Restatements and Conditional Conservatism in Companies Listed on B3

  •  Paulo Vitor Souza de Souza    
  •  Henrique Carvalho Bezerra Morais    
  •  Silvia Nayara Costa de Leao    
  •  Romulo Bruno da Cunha Campos    


This study investigated the association between financial statement restatements and conditional conservatism in Brazilian publicly traded companies listed on B3. A sample of 192 non-financial companies was used from 2012 to 2020. The conditional conservatism was measured using Ball and Shivakumar's (2005) model. The study employed five dimensions of restatement measures, comprising both voluntary and compulsory restatement modalities, and six-panel data regression models was conducted. The results revealed that there is no relationship between voluntary restatement and conservatism. However, there is generally a positive association between compulsory restatement and conservatism. Thus, companies mandated to restatement their reports by the regulator tend to be more conservative, indicating the lower quality of financial reports. These findings provide valuable insights for various external users of accounting information, as restatements can assist companies in understanding negative signals in the market, help investors in better resource allocation, and assist regulators in devising appropriate measures for prevention or punishment.

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