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JOURNAL OF ACCOUNTING AND FINANCE
The Impact of Restatements on Credit Ratings and the Enron
Industry-Peer Effect
Author(s): Cathy Zishang Liu, Beverly J. Rowe, Ya-Fang Wang
Citation: Cathy Zishang Liu, Beverly J. Rowe, Ya-Fang Wang, (2012) "The Impact of Restatements on Credit Ratings and the Enron
Industry-Peer Effect," Vol. 12, Iss. 1, pp. 20 - 30
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Credit-rating agencies have been criticized for not promptly adjusting credit rates following restatement
announcements of financial statements. We investigate the link between restatements and credit risk. Our
results indicate that restatement magnitude, duration, and the content of the restatement announcement
impact the credit-rating response. Additionally, credit rating adjustments for firms making restatements
after the Sarbanes-Oxley Act of 2002 provide evidence of the legislation’s effectiveness. Our results also
point to an Enron industry-peer effect as credit-rating agencies appear to punish oil, gas and energy
restatement firms with significantly lower credit ratings in the post-Enron era.
