The Going-Concern Market Anomaly Revisited

34 Pages Posted: 16 Mar 2016

See all articles by Allen D. Blay

Allen D. Blay

Florida State University

David Bryan

University of North Florida

J. Kenneth Reynolds

Florida State University

Date Written: March 14, 2016


Kauser, Taffler and Tan (2009) document a going-concern market anomaly in the U.S., resulting in a sizable downward drift over the subsequent one-year period for first-time going-concern recipients. The authors argue that adverse signals regarding viability are not being impounded appropriately by the market. We argue that the documented drift is a result of failing to control for financial statement information risk identifiable to the market, and likely used by the auditor in reaching a going-concern decision. We replicate Kauser et al.’s results in the 2000-2012 time period and document a sizable abnormal drift using their original matching procedure based on market measures. However, upon matching on firm-level financial characteristics which have been used as the matching criteria in nearly all prior going-concern research, the mean drift disappears in all event windows. We further show that the originally documented drift is concentrated in extremely small firms with relatively lower financial distress and firms with low institutional ownership.

Keywords: Going-concern opinion, auditor reporting, going-concern anomaly

JEL Classification: M4

Suggested Citation

Blay, Allen Dennis and Bryan, David and Reynolds, J. Kenneth, The Going-Concern Market Anomaly Revisited (March 14, 2016). Available at SSRN: or

Allen Dennis Blay (Contact Author)

Florida State University ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States
850-727-0953 (Phone)

David Bryan

University of North Florida ( email )

4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2645
United States

J. Kenneth Reynolds

Florida State University ( email )

Tallahasse, FL 32306
United States

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