Management Going‐concern Disclosures: Impact of Corporate Governance and Auditor Reputation

Jinn‐Yang Uang, David B. Citron, Sudi Sudarsanam and Richard J. Taffler

European Financial Management, 2006, vol. 12, issue 5, 789-816

Abstract: The UK regulatory requirements relating to going‐concern disclosures require directors to report on the going‐concern status of their firms. Such directors have incentives not to report fairly in the case of financially‐distressed firms. We expect effective corporate governance mechanisms will encourage directors to report more truthfully in such situations. This paper tests this proposition explicitly using a large sample of going‐concern cases over the period 1994–2000. We find that whereas auditors' going‐concern opinions predict the subsequent resolution of going‐concern uncertainties directors' going‐concern statements convey arbitrary and unhelpful messages to users. However, robust corporate governance structures and high auditor reputation constrain directors to be more truthful in their going‐concern disclosures, bringing these more into line with the more credible auditor opinions.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://doi.org/10.1111/j.1468-036X.2006.00277.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:12:y:2006:i:5:p:789-816

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().