Purpose: The authors investigate how the stock market reacts to financial restatements using the restatements data from the United States Government Accountability Office (GAO-06-678). In particular, the purpose of this paper is to examine the long-run equity performance of the restating firms,...

Purpose – This paper aims to contribute to the existing finance literature on capital structure by examining the long‐run equity performance of the firms that employ extremely conservative debt policy – zero leverage for three or five consecutive years. Design/methodology/approach – This...