Accounting Restatement Has Been A Hot Subject For Academic Research

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Accounting restatement has been a hot subject for academic research since the recent high profile financial reporting failures. Much of the academic research on restatements has explored the causes and consequences of financial statement restatements (Kinney and McDaniel 1989; Dechow et al. 1996; Hribar and Jenkins 2004; Kinney et al. 2004; Palmrose et al. 2004; Desai et al. 2006; Karpoff et al. 2008; Plumlee and Yohn 2010; Schmidt and Wilkins 2011). This investigation is driven by the assumption that weak corporate governance partially explains financial reporting failures and accounting restatements (Abbott, Parker, and Peters 2004; Argawal and Chadha 2005; Srinivasan 2005). This paper extends the restatement literature by investigating…show more content…
However, as it is seen in today’s corporate world, some corporations are moving away from the one-vote one-share norm to the dual-class structure. Dual class companies typically offer two classes of common stock, class A and class B shares, with each class offering different voting and cash flow rights. Usually, one share class, otherwise known as the superior class, is offered to company founders, their families, and top executives.
The superior share class offers multiples votes per share to founders, their families, and top executives. Such superior voting rights insulate corporate insiders from outside control and threat of takeover including that by investors that have accumulated large blocks of the company’s publicly traded shares. The most common dual class structure grants ten votes per share to the restricted voting class (Smart and Zutter, 2003). The other share class, also called the inferior class is offered to the public granting one vote per share. Most dual class companies are family controlled. Dual class ownership structure is common among entertainment and media companies (Smart and Zutter, 2003) such as Dow Jones and Co. Inc., Washington Post Co., and New York Times Co. (NYT). Other big companies such as Alibaba Group Holding Ltd., LinkedIn Corp., Berkshire Hathaway Inc., Facebook Inc., Ford, Google, and Groupon have also adopted the controlled feature the dual class structure offers.
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