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Going concern opinions are not bad news: Evidence from industry rivals

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Author Info

  • Luís M. S. Coelho
  • Rúben M. T. Peixinho
  • Siri Terjensen
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    Abstract

    This paper examines whether going concern audit opinions (GCO) affect the stock price performance of the announcing firms and their industry rivals. Our original evidence clearly suggests that such accounting event is asymmetrically perceived by the market depending on whether the firm is qualified by the auditor or not. In particular, firms receiving a GCO earn negative abnormal returns at the audit report’s disclosure date and over the following year whereas their industry rivals exhibit positive abnormal returns at the GCO date and in the subsequent one-month period. This is in contrast with the preevent abnormal returns, which, on average, are negative and significant for all firms operating within the industry. Overall, we highlight the relevance of audit opinions and mandatory accounting information for the timing of transactions in financial markets.

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    File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp162012.pdf
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    Bibliographic Info

    Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2012/16.

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    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:ise:isegwp:wp162012

    Contact details of provider:
    Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
    Web page: https://aquila.iseg.utl.pt/aquila/departamentos/EC

    Related research

    Keywords: Audit reports; going concern; competitive effect;

    This paper has been announced in the following NEP Reports:

    References

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