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The Effect of CEO and CFO Resignations on Going Concern Opinions

Author

Listed:
  • Joseph D. Beams
  • Yun-Chia Yan
  • Wachira Boonyanet
  • Pongprot Chatraphorn

Abstract

Anecdotal evidence suggests that the resignation of a top executive increases a firm’s likelihood of failure. When auditors perceive an increased likelihood of failure, a going concern modified audit opinion is issued. This study tests the relationship between top management resignations and the issuance of going concern audit opinions. The study uses financially distressed firms in the United States from 2008-2010 and a logistic regression model to test the relationship. The findings show a positive relationship between CFO resignations and firms receiving a going concern audit opinion even after controlling for other predictors of a going concern audit opinion. However, no significant relationship is found between CEO resignations and receiving a going concern audit opinion. Firm size, cash flow from operations, stock return, and investments all had a significant relationship with going concern opinions.Â

Suggested Citation

  • Joseph D. Beams & Yun-Chia Yan & Wachira Boonyanet & Pongprot Chatraphorn, 2016. "The Effect of CEO and CFO Resignations on Going Concern Opinions," Accounting and Finance Research, Sciedu Press, vol. 5(4), pages 1-76, November.
    • Handle: RePEc:jfr:afr111:v:5:y:2016:i:4:p:76
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    References listed on IDEAS

    as
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    2. Randolph P. Beatty & Edward J. Zajac, 1987. "Ceo change and firm performance in large corporations: Succession effects and manager effects," Strategic Management Journal, Wiley Blackwell, vol. 8(4), pages 305-317, July.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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