The intra-industry effects of going concern audit reports

Resumo / Abstract: This paper investigates the effect of a going concern opinion (GCO) on the equity value of the announcing firm’s competitors. On average, the disclosure of a GCO report increases the value of a value-weighted portfolio of competitors by 0.29% around the event date. This positive effect is significantly larger for industries that are relative more levered and concentrated. Additional tests reveal that the GCO competitive effect is not a mere short-term phenomenon. In particular, investors can earn up to 2.3% on a risk-adjusted basis over the first four-month post-GCO period. Our results suggest that the disclosure of GCO leads to an important intra-industry competitive effect and emphasize the importance of accounting information in the workings of financial markets.

Outros seminários / Other seminars: Programa completo / Full programme.