[STAT/AP] Juan Juan Cai: Risk of Extreme Accounting Failures

27 February 2023 15:45 till 17:45 - Location: EEMCS Lecture Hall G | Add to my calendar

We use extreme value theory to estimate the risk of extreme accounting failures using U.S.
restatement data over the period 1995-2022. This risk has as yet rarely been quantified,
even though its reduction is a commonly cited policy objective in  financial reporting
regulation. We find that the Value-at-Risk has been halved after the introduction of
the Sarbanes-Oxley act. Extreme financial restatement risk on the U.S. stock market,
however, remains substantial: the estimated 1-year probability of a more than $1bn
downward correction in net income is still close to 40%.

This is a joint work with Kees Camfferman, Andre Lucas, Jacco L. Wielhouwer.