Restatement of previous period’s financial statements that corrects the reported earnings in the previous period, made financial reporting efficiency unexpected in the future. In fact, the restated financial statements are not reliable and are in low quality. Thus, restatements decrease the level of investors' confidence about the validity and competence of management and reduce the quality of reported earnings. In this study, the information risk of restatement of financial statements has been examined. In period of 2002-2010, we use 115 companies that are listed in Tehran Stock Exchange. The results shows that restatement of the financial statements increase the level of innate and discretionary risk and we also find an increase, of smaller magnitude, in the pricing of discretionary information risk for non-restatement firms in the same industries as the restatement firms, consistent with an information transfer effect.
