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

Luís M. S. Coelho, Rúben M. T. Peixinho and Siri Terjensen

No 2012/16, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

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.

Keywords: Audit reports; going concern; competitive effect (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-bec and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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