Every year, hundreds of companies restate their accounts because of accounting errors in the past. Most of the time the SEC does nothing, as it's likely honest mistakes were made. Almost always the errors result in higher reported earnings.
However, some academics looked at 2,376 restatements that US companies issued between 1997 and 2008 and found when a prominent company admits to mismanaging its books, many of its competitors will begin mismanaging their own books in similar ways soon afterward. And they will continue to do so for a couple of years before issuing their own restatements. For some strange reason these restatements occur only when the company doesn’t get disciplined by the SEC, sued by its investors, or criticized in the press.
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