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

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

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.

Suggested Citation

  • Luís M. S. Coelho & Rúben M. T. Peixinho & Siri Terjensen, 2012. "Going concern opinions are not bad news: Evidence from industry rivals," Working Papers Department of Economics 2012/16, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp162012
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    References listed on IDEAS

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    Cited by:

    1. Dody Hapsoro & Tulus Suryanto, 2017. "Consequences of Going Concern Opinion for Financial Reports of Business Firms and Capital Markets with Auditor Reputation as a Moderation Variable - An Experimental Study," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 197-223.
    2. Dody Hapsoro, 2017. "Consequences of Going Concern Opinion for Firms and Capital Market with Accounting Firm Size as Moderation Variable," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 209-230.

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    Keywords

    Audit reports; going concern; competitive effect;
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