The Impact of Financial Restatement on Firm Value

Abstract

This study examines the relationship between financial restatement and firm value in Malaysian public listed firms. In addition, it assesses the moderating effects provided by corporate governance mechanisms on the relationship of financial restatements and firm value. The study covers the period 2009-2015 and involves 142 public listed companies in Bursa Malaysia with financial restatements. The findings reveal that financial restatements do adversely impact firm value and that financial restatements negatively and significantly affect firm value. In terms of moderating variables, we find that the interaction between financial restatement and family ownership is negatively associated with firm value. In addition, this study also finds that the interaction between financial restatement and institutional ownership is positively and significantly associated with firm value. In conclusion, in the Malaysian context, this study establishes that financial restatement has a negative impact on firm value.