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- Title
Financial Misrepresentation and Its Impact on Rivals.
- Authors
Goldman, Eitan; Peyer, Urs; Stefanescu, Irina
- Abstract
This paper examines how the announcement of an accusation of fraudulent financial misrepresentation affects industry rivals of the accused firm. Consistent with the importance of the industry competition effect, we find that rivals in less competitive industries benefit from the event. However, in competitive industries, the information spillover effect dominates the competition effect, resulting in negative returns to rival shareholders following the event. The spillover effect increases in importance with the severity of the accusation and is more important for opaque rivals and for rivals that had positive stock price reactions to past positive earnings surprises of the accused firm.
- Subjects
ECONOMIC competition; STOCK prices; PRICES of securities; FINANCIAL crises; STOCK price indexes; FINANCIAL markets
- Publication
Financial Management (Wiley-Blackwell), 2012, Vol 41, Issue 4, p915
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2012.01211.x