Restating the Obvious - Accounting Restatements: Evidence from Swedish Private Firms

Sammanfattning: ACCOUNTING RESTATEMENTS as a phenomenon has increased in financial reporting over the last decades. Although there is ample research on listed firm restatements, existing literature has largely overlooked private firms. Thus, the purpose of this study is to examine what types of firms restate and why firms restate in a Swedish private setting. To understand what type of firms restate, we collect data from 2014 for 624 firms that restated (and 291,028 firms that did not), and find that restating firms, to a large extent in line with prior findings, are less often audited, younger, and financially distressed. We further demonstrate that contextual differences affect what type of firms restate by showing that debt structures, growth and profitability differ from prior research. We then investigate why firms restate by reissuing a new financial report, despite the administrative guidance under the K2 and K3 standards. We conduct 40 interviews with firms restating in 2021 and show that firms perceive that the benefits of restating outweigh the consequences, with the main motives attributed to avoiding tangible consequences, damaging outside perception or low organizational knowledge. We also find that several firms are not aware of the guidance not to reissue reports. Further, we operationalize our interview findings and find that, on an aggregated level, high financial proficiency, and avoiding tangible consequences, are associated with a higher likelihood of restatements. Overall, we contend that our findings highlight current deficiencies in the reporting standards and their enforcement, and adds a new perspective to the discussion, interpretation and implementation of reporting regulation and are thus of interest for researchers, regulators, and practitioners alike.