John Jiang, Michael Shen
Our study examines the impact of nonfraud financial restatements on the careers of corporate accountants. Using LinkedIn data, we identify a sample of accountants working at 201 firms that restated their financial statements between 2004 and 2014. We find that compared with human resource employees within the same company or corporate accountants in matched control firms, accountants in restatement firms, particularly senior staff, have a higher rate of departure and a lower probability of moving to a higher-ranked position outside the company after a restatement is announced. Using a longer job search period as a measure of being forced to leave, we find that the higher departure rate for senior accountants is because of being forced out rather than leaving voluntarily. The higher departure rates occur only for accountants working at firms with more severe restatements. In a separate sample of firms that restate financial statements because of clerical errors, we do not find higher departure rates for accountants after the restatement is revealed. Our results suggest that senior accountants in restatement firms experience negative outcomes in the labor market. This paper was accepted by Suraj Srinivasan, accounting. Funding: J. (X.) Jiang acknowledges research support from the Eli Broad College of Business. M. Shen acknowledges financial support from the NUS Start-up Grant [Grant A-0003914-00-00] and the Singapore MOE Tier-1 Grant [Grant A-8000098-00-00]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.00430 .