Financial restatements can prompt similar companies to misstate their own earnings, according to a new study.

The authors—Simi Kedia of Rutgers University Business School, Kevin Koh of Nanyang Business School in Singapore and Shivaram Rajgopal of Columbia University Business School—believe their study to be “the first to document that peer firms begin managing earnings after an earnings restatement is announced by target firms in their industry or in their metropolitan statistical area.” The study, entitled "Evidence on Contagion in Earnings Management,” will be published in the November issue of the American Accounting Association journal The Accounting Review.

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