Purpose This study examines whether financial restatement announcements affect stock returns of South African firms and whether market reactions vary across the pre- and post–King IV periods, by the reason for the restatement and by whether firms have previously restated their financials. Design/methodology/approach We analyse financial restatements by South African firms between 2007 and 2023 using an event study. Cumulative abnormal returns (CARs) are calculated over 3-, 5- and 21-day event windows. Differences in CARs are examined across sub-groups defined by the pre- and post–King IV period, the reason for restatement (accounting error, irregularity or policy change) and whether firms have previously restated. Cross-sectional regressions further assess these effects while controlling for other factors. Findings CARs across all event windows are negligible, suggesting that markets show limited response to financial restatement announcements. Market reactions do not vary meaningfully across the pre- and post–King IV periods, across restatement types or between firms with and without prior restatements. Research limitations/implications Financial restatements are relatively rare in South Africa, resulting in a limited sample. Findings should therefore be interpreted as indicative of average market responses within this institutional setting and caution should be exercised in generalising these beyond the South African context. Practical implications The limited market reaction suggests that investors may view restatements as technical corrections rather than as signals of severe governance failure. Originality/value This study contributes evidence on market responses to financial restatements from a Majority World context, using a broader sample than prior South African studies, and evaluates whether changes in the governance regime and the reason for restatement influence the market response.
Jwara et al. (Tue,) studied this question.