Does the Stock Market Underreact to Going Concern Opinions? Evidence from the U.S. and Australia
Posted: 20 Dec 2006
We examine twelve-month returns following disclosure of first-time going concern (GC) opinions in the U.S. and Australia. We find no evidence of significant negative abnormal returns associated with GC opinions in Australia. In the U.S., negative abnormal returns subsequent to GC opinions are sensitive to choice of expected returns - notably, there are no significant negative abnormal returns when using factor models or after controlling for momentum. Overall, contrary to Taffler, Lu and Kausar's (2004) U.K. results, we are unable to document a market anomaly in the U.S. or Australia associated with GC opinions.
Keywords: Capital markets, Market efficiency, Market anomalies, Auditing, Audit reports, Going concern opinion
JEL Classification: G12, G14, G15, M41, M49
Suggested Citation: Suggested Citation