Purpose - The aim of this study is to examine to what extent corporate managers under considerable financial constraints engage in opportunistic accounting practices that could lead to restating their financial restatements as well the role of corporate governance in monitoring the opportunistic behavior of those managers. Design/Method - Using logistic regression analysis, this study investigated the direct relationship between the level of financial constraints and financial restatements’ incidence as well the moderating role of corporate governance in mitigating the managerial opportunism after controlling firm-specific characteristics that potentially affect this relationship. Findings- The study found a significant and positive impact of financial constraints on the probability of financial restatements. Then, we examine moderating factor (governance) that potentially influence the relation between the level of financial constraints and restatement probability. The interaction of financial constraints and corporate governance is statistically significant and reflects that corporate governance has a moderating role on the hypothesized relationship of financial constraints and financial restatements’ incidence. Finally, our results indicated that firms under higher level of financial constraints have higher tendency toward restating their financial statements as well corporate governance mechanisms could restrain the managerial opportunistic behavior in financially constrained firms that could results in financial restatements. Also, we found that financially constrained firms with larger size and lower leverage are associated with higher restatement probabilities.
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