more-arw search

Some CFOs Using Video for Earnings Restatements

Is this the way to issue an earnings restatement?

Many marketers and communications professionals will elaborate on the opportunities that the internet and its social channels - YouTube, Twitter, LinkedIn - offer for distributing a message, but research has shown its necessary to be selective about picking a channel that fits the message.

A recent study from the American Accounting Association sought to understand how companies are using video and YouTube to announce financial restatements, and found that while it can sometimes "shore up investors' trust," it also presents a risk that investors' trust will be damaged more than it would be from a written statement. The video medium is a better option if the top management is issuing an apology for the restatement and is accepting internal responsibility for the mistake. On the flip side, when management apologizes but places the blame on an external force, a video announcement would probably generate a negative response from investors, the group found.

Specifically, CEOs who take responsibility for the error via video get an average trustworthiness rating of 6.15 on a one-to-seven point scale, while those chiefs who point the finger at outside accountants received a 4.0 point average.

"Managing the response of investors to events as negative as restatements …  is a formidable undertaking," stated Frank D. Hodge, of the University of Washington's Foster School of Business and one of the study leaders. "Doing so via video over the Internet makes it all the more formidable."