Financial Restatements andmanager's earnings forecasting behavior

The purpose of this study is to examinemanagers’ earnings forecasting behaviorin pre and post-periods around financial restatements. Following restatements, two conflicting incentives including “the reputation repair” and “risk avoidance by manipulating forecast bias after restatements” could be raised. In order to examine the behavior of managers in pre and post-periods around restatements, quasi-experimental research design and “Interrupted Time Series Design with Comparison Group” defining test and control groups consist of Tehran stock exchange companies (65 companies) between2007-2013 is used. Results show that there is no significant difference between earning forecast optimistic biases at post-restatement periods in test group versus control group. Rejecting the hypothesis suggested there is significant difference in managers’ earnings forecasting behaviorbetween test group and control group following restatements, it is inferred that other factors beyond restatements could impactmanagers’ earnings forecasting behaviorin test group companies.