Court Stringency and Voluntary Restatements (Fri, 20 April, 1:15-2:15 PM)

Asian Institute of International Financial Law
Faculty of Law, The University of Hong Kong


Court Stringency and Voluntary Restatements

Dr Haitian Lu
Associate Dean and Associate Professor in Law
The Hong Kong Polytechnic University

Friday, 20 April 2018
1:15 – 2:15 pm
Room 723, 7/F Cheng Yu Tung Tower
The University of Hong Kong

This paper studies how district court stringency affects firms’ propensity to admit their misreporting using different samples of misstated firms. We find robust evidence that firms headquartered in high dismissal rate (lenient) court jurisdictions are more likely to make voluntary restatements. Exogenous shock from Supreme Court’s Tellabs decision confirms this effect. We consider a range of explanations and find the results most easily explained by managers using court dismissal rates as a heuristic when making voluntary restatement decisions. Our evidence shed light on the complicated effect of legal environment on financial reporting quality. The paper is a joint work with Agnes Cheng (PolyU), Henry He Huang (Yeshiva University) and Zhen Lei (PolyU) and is available HERE.

Dr Haitian Lu is the Associate Dean of PolyU Faculty of Business and Associate Professor in law at the School of Accounting and Finance. During January to June 2016 he was visiting research professor at New York University Stern School of Business. He is also the deputy director of the Center for Economic Sustainability and Entrepreneurial Finance (CESEF) at the Hong Kong Polytechnic University. Dr Lu obtained his Ph.D in law from National University of Singapore, Master of Law from Liverpool University and Bachelor of Law from Nanjing University. His teaching and research interest centers on the legal development, corporate governance, and corporate social responsibilities in Hong Kong and mainland China. He is the author/co-author of the books Secured Finance Law in China and Hong Kong (2010 Cambridge University Press), Truths and Half Truths: China’s Socio-Economic Reforms 1978-2010 (2011 Chandos Publishing), and The Role of China in Global Dirty Industry Migration (2008 Chandos Publishing). Dr Lu published widely in law, finance, economics and management journals.

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About the Law & Economic Workshop series
The Law & Economic Workshop is a forum devoted to discussing the latest research in law and economics featuring both external and internal speakers. The workshop aims to promote interdisciplinary research, and to foster collaboration between law professors and scholars from other disciplines. Anyone with a keen interest in law and economics is welcome, yet potential attendees should bear in mind that we prefer to commence substantive conversation as quickly as possible without an extended presentation by the guest. Taking a look at the paper in advance is, therefore, advisable.