Going-Concern Opinions and Corporate Governance

Ren, Ning; Zhu, Yun

Going-Concern Opinions and Corporate Governance

Ren,N., Zhu, Y. Going-Concern Opinions and Corporate Governance.International Journal of Banking, Accounting and Finance. Forthcoming

35 Pages Posted: 29 Nov 2018

See all articles by Ning Ren

Ning Ren

Long Island University Post; Rensselaer Polytechnic Institute

Yun Zhu

St. John's University - Department of Economics and Finance

There are 2 versions of this paper

Date Written: October 29, 2018

Abstract

This paper looks into the issuance of auditor’s going-concern opinions and investigates how it triggers subsequent changes in corporate governance, specifically, the corporate control, executive compensation and management turnover. Using a difference-in-difference approach with the exogenous shock of Auditing Standard No. 5 (AS5) in 2007, we find that going-concern opinion leads to the decrease in blockholder ownership and institutional ownership, the reduction in CEO’s cash compensation and total compensation, and the increase in the turnovers of top executives and auditors, indicating strong monitoring function of the auditors.

Keywords: going-concern opinion, corporate governance, blockholder ownership, institutional ownership, CEO compensation, CEO turnover

JEL Classification: M41, M12

Suggested Citation: Suggested Citation

Ren, Ning and Zhu, Yun, Going-Concern Opinions and Corporate Governance (October 29, 2018). Ren,N., Zhu, Y. Going-Concern Opinions and Corporate Governance.International Journal of Banking, Accounting and Finance. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3279099