Labor Market Consequences of Restatements for Corporate Accountants

This study examines the impact of restatements on the labor market outcomes for corporate accountants. I use LinkedIn to identify a comprehensive sample of corporate accountants who work for firms that restated their financial statements between 2004 and 2014. Employing a difference-in-differences specification, I find that corporate accountants experience a higher turnover rate and a worse promotion prospect after restatements are announced, compared to a control sample of human resources professionals. The increase in turnover is more pronounced for senior internal auditors, and in firms with more severe restatements. I also find that senior internal auditors experience a higher turnover rate but not a worse promotion prospect before restatements are announced, compared to senior corporate accountants. Last, I find that internal auditors who leave after restatements experience a worse promotion prospect than those who leave before restatements are announced. Overall, my findings suggest that the labor market disciplines corporate accountants after restatements are announced. Internal auditors could minimize the adverse labor market outcomes of restatements by proactively departing.