In denial? Stock market underreaction to going-concern audit report disclosures

Public-to-private buy-outs, distress costs and private equity

“…However, although associated with bankruptcy risk, the z-score has also been used in the analysis of firms that are going concerns [see for example, Taffler (1992 and2004), Mulcher et al (1997) and Taffler et al (2004)]. As Agrawal and Taffler (2007) note, the z-score 'is a well-accepted tool for practical financial analysis.'…”

The External Auditor’s opinions and the stakeholders’ purposes: an empirical analysis in Sri Lanka

“…At the very beginning looked up the archival data obviously assist to realize the certain research gap should be the most complete on the U-EMP, In accordance with the interpreted results have expose to view that the audit opinions discussed undergoing concern circumstances as well as special matter relating to the company are information content (Chen & Church, 1996: Carlson et al, 1998:Jones, 1996: Chen et al, 2000, Taffler et al, 2004: Joe, 2003: Blay & Geiger, 2001,Menon & Williams, 2010, Kausar et al, 2009: O'Reilly, 2009: Schaub, 2006: Feldmann & Read, 2013.The little evidences are presented by the investigations regarding the information content of the opinions relating to going concern (Dopuch et al, 1987: Mutchler, 1985: Joe, 2003: Ogneva & Subramanyam, 2007: Herbohn et al, 2007. GCAOs' informative value is not appearing or inconclusive (Elliott, 1982).…”

“…Market variables react negatively on the going concern related audit opinions in short-run (Carlson et al, 1998). The responses are negative in long-run of the stock price return on audit opinions relating to the going concern (Taffler et al, 2004). Stock market variable is reacting negatively with the audit opinions are publicized by the auditors regarding going concern or materialized matter (Chen et al, 2000: Blay & Geiger, 2001: Menon & Williams, 2010.…”

Bad News Do Not Always Travel Slowly: The Bankruptcy Case

“…Several studies provide evidence in favor of the behavioral argument by showing that investors often fail to diversify (e.g., Goetzmann and Kumar, 2008), they trade too much (Odean, 1999), they exhibit a disposition effect (e.g., Barber and Odean, 1999), or they may even trade for gambling reasons (Kumar, 2009) and tend to follow correlated investment strategies (e.g., Barber and Odean, 2008). There is also convincing evidence that sophisticated investors face important limits to arbitrage (e.g., Pontiff, 1996 andTaffler, Lu andKausar, 2004), which explains why they might choose not to act on a potential market mispricing even if they are aware of it (Merton, 1987).…”