*Corresponding authorEarnings misstatements, restatements and corporate governance We investigate the corporate governance characteristics of firms that restate previously-reported accounting data. Unlike other studies that focus on either the misstatement or the restatement only, we examine changes in the governance characteristics of restating firms from the initial misstatement to the restatement. While the other studies are concerned with the causes of financial misreporting, we endeavor to obtain insights into the changes that lead to the detection and correction of such misreporting. We find that prior to the misstatement, misstating firms are more likely to have CEOs who sit on nominating committees, less independent boards of directors, and less independent audit committees, relative to control firms. Our results indicate that pre-misstatement agency conflicts are not resolved prior to restatements. Boards and audit committees of restating firms continue to be relatively less independent at the time of the restatement. We also find that restating firms are more likely to experience CFO turnover than control firms. Based on the results, we conclude that the restatements, which constitute an admission and correction of accounting irregularities, are not attributable to governance improvements in firms
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