Error or Manipulation?——Attribution of Earnings Restatement

Are earnings restatements due to inner error or intentional earnings manipulation? This paper studies the motivation of overstated companies misstating financial reports,and examines wether restated companies manipulate annual earnings using accrual and cash flow.The results show that overstated companies have higher discretionary accrual and lower abnormal cash flow from operations compared with no-restatement companies in restated years,indicating that restatements' companies have used accrual and real earnings management activities to manage earnings.