Relationship between Firm Characteristics and Financial Restatements

This study investigates the relationship between firm characteristics and financial restatements. A sample consisting of 900 year - firm during the period 2003 to 2011 was studied. The logistic regression was applied to test the hypothesis. In the first method, the significant direction of relationship between the variables was examined. Using the backward method, an optimal model was introduced to predict the financial restatements. To measure the accruals, the modified jones model was used by Dechow et al. The results show a negative and meaningful relationship between the firm size and financial restatements. There is also a positive relationship between the financial restatements with firms' losses in a year before the statement, financing through the floatation and B/P ratio.