The authors show that firms that restated earnings in the past are subject to reputational penalties in their interactions with financial intermediaries and capital markets. Restatement firms pay significantly higher underwriting fees for their seasoned equity offerings (SEOs), compared to both themselves prior to restatement and non-restatement firms. The effect of past restatement on underwriting fees is primarily driven by restatements due to intentional manipulation rather than errors, and it is beyond the effect of pre-SEO earnings management previously documented in the literature. The effect is stronger when firms try to raise a larger amount of capital, and weakens with the passage of time since restatement. The authors also find that the SEO announcements of restatement firms cause greater stock price declines, adding to the floatation costs these firms incur.

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