Audit Opinions and Information Asymmetry in the Stock Market

31 Pages Posted: 3 Jun 2017

See all articles by David Abad

David Abad

Universidad de Alicante

Juan P. Sánchez‐Ballesta

University of Murcia

José Yagüe

University of Murcia

Date Written: June 2017

Abstract

This study analyses the relationship between the content of the audit reports and information asymmetry levels in the stock market for a sample of Spanish firms. By implementing an association study, we document (1) that firms with audit qualifications show higher information asymmetry levels than those with unqualified opinions; (2) firms with non‐quantified qualifications show higher informational asymmetry than firms with quantified qualifications; and (3) we find a stronger effect on the level of informational asymmetry in the case of going concern qualifications. Our findings suggest that audit qualifications reporting more uncertainty on firm accounting statements result in higher adverse selection risk.

Keywords: Adverse selection, Audit opinions, Financial reporting quality, Information asymmetry

Suggested Citation

Abad, David and Sánchez‐Ballesta, Juan P. and Yagüe, José, Audit Opinions and Information Asymmetry in the Stock Market (June 2017). Accounting & Finance, Vol. 57, Issue 2, pp. 565-595, 2017, Available at SSRN: https://ssrn.com/abstract=2979656 or http://dx.doi.org/10.1111/acfi.12175

David Abad (Contact Author)

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, 03690
Spain

Juan P. Sánchez‐Ballesta

University of Murcia

Avda Teniente Flomesta, 5
Murcia, Murcia 30100
Spain

José Yagüe

University of Murcia ( email )

Department of Management and Finance
Campus de Espinardo s/n
Murcia, 30100
Spain
+34 868883862 (Phone)
+34 868887537 (Fax)

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