Browsing by Author "Sorocovici, Cristina"
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- The intra-industry effects of going concern withdrawn audit reportsPublication . Sorocovici, Cristina; Coelho, Luís; Peixinho, RúbenThe market reaction to the disclosure of corporate news and the intra-industry effect of such announcements are two important topics in the accounting and finance domain. For instance, Taffler, Lu and Kausar (2004) shows that the market underreacts to the announcement of a going concern opinion (GCO), but completely anticipates the announcement of a going concern withdrawal (GCW) (Kausar, Taffler and Tan, 2006). In addition, Coelho, Peixinho and Terjesen (2014) shows that the GCO disclosure generates an intra-industry competitive effect in the industry rival firms. However, little is known about the intra-industry effect of a GCW. This master thesis investigates investors’ reaction to the withdrawal of a going concern audit opinion. In particular, this research clarifies if this good news impacts in the industry rivals of GCW firms and contributes to understand if investors process immediately the implications of such news. The sample consists of 95 US companies that had their going concern audit opinion withdrawn between 1995 and 2008. It particularly investigates whether industry rivals of GCW firms experience abnormal returns in the surrounding days to the announcement of such good news by the announcing firms. The results show that, contrary to the GCW firms, rival firms are associated to negative abnormal returns of approximately -1,5% for the (-5, 5), (-6, 6) and (-10, 10) windows surrounding the GCW announcement. In addition, there is some evidence that this competitive effect is due to investor’s reaction immediately after the announcement day and not by an anticipation of the information. The robustness tests indicate that the competitive effect is likely to be influenced by the first GCW cases per industry and is not driven by the most representative industries in the GCW sample.