Abstract
The literature related with financial reporting events (such as earnings forecast, annual reports releases, financial plan, takeover, merger announcements etc.) is controversial. The main issue arises to confirm whether and to what extent those events affect stock market returns. As regards audit reports release and their impact on the stock market, many studies attempted overtime to capture the magnitude of these phenomena. This chapter aims at exploring the same phenomenon. I use the Event Study methodology (ES) to test whether GCOs impact on stock returns of firms listed at the Italian stock exchange, from 2008 to 2014, alongside the financial crisis. Findings are partially in line with previous studies shedding a light on the negative impact of GCOs on stock market returns, signalling a certain degree of value relevance. The main novelty is that Italian investors reacted (on average) negatively even when GCOs are attached to clean opinions. According to Carson et al (Audit A J Pract Theory 32(1):353–384, 2013) categorization, this research falls in full among studies aimed at detecting consequences of GCOs for shareholders. Moreover, the location matter of the study seems particularly useful because only another study (Ianniello and Galloppo in Manag Audit J 30(6/7):610–632, 2015) has detected the impact of GCOs on stock market returns in Italy.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Al-Thuneibat AA, Khamees BA, Al-Fayoumi NA (2008) The effect of qualified auditors’ opinions on share prices: evidence from Jordan. Manag Audit J 23:84–101
Ameen EC, Chan K, Guffey DM (1994) Information content of qualified audit opinions for over-the-counter firms. J Bus Financ Account 21(7):997–1011
Baskin EF (1972) The communicative effectiveness of consistency exceptions. Account Rev 47:38–51
Boehmer E, Musumeci J, Poulsen A (1991) Event-study methodology under conditions of event-induced variance. J Financ Econ 30(2):253–272
Brown SJ, Warner JB (1980) Measuring security price performance. J Financ Econ 8:205–258
Brown SJ, Warner JB (1985) Using daily stock returns—the case of event studies. J Financ Econ 14:3–31
Campbell JY, Lo AW, MacKinlay AC (1997) Econometrics of financial markets. Princeton University Press, Princeton NJ
Carson E, Fargher NL, Geiger MA, Lennox CS, Raghunandan K, Willekens M (2013) Audit reporting for going-concern uncertainty: a research synthesis. Audit J Pract Theory 32(1):353–384. https://doi.org/10.2139/ssrn.2000496
Castellano R, D’Ecclesia RL (2013) CDS volatility: the key signal of credit quality. Ann Oper Res 205(1):89–107
Castellano R, Scaccia L (2012) CDS and rating announcements: changing signaling during the crisis? Rev Manag Sci 6(3):239–264
Chen KCW, Church KB (1996) Going concern opinions and the market’s reaction to bankruptcy filings. Account Rev 71(1):117–128
Chow CW, Rice SJ (1982) Qualified audit opinions and share prices-an investigation. Audit J Pract Theory 1(2):35–53
Craswell AT (1985) Studies of the information content of qualified audit reports. J Bus Financ Account 12(1):93–115
Davis R (1982) An empirical evaluation of auditors “subject-to” opinions. Audit A J Pract Theory 2(1):13–32
Dodd P, Dopuch N, Holthausen R, Leftwich R (1984) Qualified audit opinions and stock prices. Information content, announcement dates, and concurrent disclosures. J Account Econ 6:3–38
Dopuch N, Hothausen R, Leftwich R (1986) Abnormal stock returns associated with media disclosure of subject to qualified audit opinions. J Account Econ 8:93–117
Elliott JA (1982) “Subject to” Audit opinions and abnormal security returns–outcomes and ambiguities. J Account Res 20:617–638
Fama EF (1991) Efficient capital markets: II. J. Finance 46(5):1575–1617
Firth M (1978) Qualified audit reports: their impact on investment decisions. Account Rev 53(3):642–650
Holt G, Moizer P (1990) The meaning of audit reports. Account Bus Res 20(78):111–121
Ianniello G, Galloppo G (2015) Stock market reaction to auditor opinions—Italian evidence. Manag Audit J 30(6/7):610–632
Ittonen K (2012) Market reactions to qualified audit reports: research approaches. Account Res J 25(1):8–24
Kolari JW, Pynnönen S (2010) Event study testing with cross-sectional correlation of abnormal returns. Rev Financ Stud 23(11):3996–4025
Mentz M, Schiereck D (2008) Cross-border mergers and the cross-border effect: the case of the automotive supply industry. Rev Manag Sci 2(3):199–218
Mikkelson WH, Partch MM (1988) Withdrawn security offerings. J Financ Quant Anal 23(2):119–133
Ogneva M, Subramanyam KR (2007) Does the stock market underreact to going concern opinions? evidence from the U.S. and Australia. J Account Econ 43(2–3):439–452
Pucheta-Martínez MC, Martínez AV, Benau MAG (2004) Reactions of the Spanish capital market to qualified audit reports. Eur Account Rev 13(4):689–711
Soltani B (2000) Some empirical evidence to support the relationship between audit reports and stock prices—the French case. Int J Audit 4(3):269–291. https://doi.org/10.1111/1099-1123.00317
Taffler RJ, Lu J, Kausar A (2004) In denial? Stock market underreaction to going-concern audit report disclosures. J Account Econ 38:263–296
Tahinakis P, Samarinas M (2016) The incremental information content of audit opinion. J Appl Account Res 17(2):139–169
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2018 The Author(s), under exclusive licence to Springer International Publishing AG, part of Springer Nature
About this chapter
Cite this chapter
Brunelli, S. (2018). Effects of GCOs in Italy: Some Empirical Evidence. In: Audit Reporting for Going Concern Uncertainty. SpringerBriefs in Accounting. Springer, Cham. https://doi.org/10.1007/978-3-319-73046-2_3
Download citation
DOI: https://doi.org/10.1007/978-3-319-73046-2_3
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-73045-5
Online ISBN: 978-3-319-73046-2
eBook Packages: Business and ManagementBusiness and Management (R0)