While restatements have diminished in both number and severity over the past decade, stock prices have shown little reaction, according to an academic study commissioned by the Center for Audit Quality.

The study by Susan Scholes, a professor at the University of Kansas, says restatements numbered 856 in 2003 before Sarbanes-Oxley took effect, peaked in 2006 at 1,784, and then declined to 738 in 2012.The number of restatements disclosed via Form 8-K Item 4.02, meaning they are severe enough that investors need to be advised immediately, also declined, the study says. Those 8-K restatements represented 61 percent of the 1,600 restatements filed in 2005, but declined to only 35 percent of the 738 restatements filed in 2012.

The study examines other indicators that suggest restatements have become less serious over time. Restatements generally involve fewer accounting issues, for example. In 2005, 70 percent of restatements involved multiple accounting issues compared with only 28 percent of restatements in 2012. The accounting issues themselves have become less serious as well, the study says, and cover shorter periods of time over the course of the decade.

Over the 10-year period, stock prices reacted negatively to restatements with an average 1.5-percent decline, the study concludes. More serious restatements, however, produced more serious consequences to stock prices. Stock prices fell an average of 2.3 percent for restatements disclosed in Item 4.02 while they fell only 0.7 percent on average for other restatements.

The study also examines a number of regulatory and policy changes over the decade that may have played a role in the diminishing number and severity of restatements. In addition to Sarbanes-Oxley and the creation of the Public Company Accounting Oversight Board, the study examines various initiatives by the Securities and Exchange Commission, including Staff Accounting Bulletin 99 that focused on materiality, SAB 101 clarifying issues around revenue recognition, the Item 4.02 requirement, and others.

“This report takes a deeper look at restatements including the company characteristics of restating companies and analysis of market reactions to restatement announcements,” said Scholz in a statement. “The findings shed light on the impact of SOX and other regulations on financial restatements.”

Cindy Fornelli, executive director of CAQ, said the study is encouraging. “As the paper capably summarizes, policy developments—such as new laws, regulations, and auditing standards—have played a role in these positive trends,” she said.