The market reaction to Arthur Andersen's role in the Enron scandal: Loss of reputation or confounding effects?

Nelson, Karen K.; Price, Richard A.; Rountree, Brian

doi:10.1016/j.jacceco.2008.09.001

Cited by 108 publications

(52 citation statements)

References 28 publications

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“…CP investigates the share price reaction of Andersen's clients to various information events that could lead investors to revise their beliefs regarding Andersen's reputation. ( Nelson KK, Price RA, Rountree BR, 2008) Perhaps most damaging to Andersen's reputation was their admission on January 10, 2002 that employees of the firm had destroyed documents and correspondence related to the Enron engagement. For a sample of S&P 1500 firms, CP reports that in the 3-day window following the shredding announcement (0, +2), Andersen clients experienced a significant −2.03% market reaction, and this reaction was significantly more negative than for Big 4 clients.…”

Section: Enron and The Reputation Of Arthur Andersenmentioning

confidence: 99%

The Case Analysis of the Scandal of Enron

Li¹

2010

IJBM

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Section: Enron and The Reputation Of Arthur Andersenmentioning

confidence: 99%

The Case Analysis of the Scandal of Enron

Li¹

2010

IJBM

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show abstract

“…They also noted that the market reacted more negatively to Andersen client than other Big 4 auditor clients. Cahan and Zhang (2006) Nelson et al (2008) find that the stock of Andersen clients reacted more negatively relative to Big 4 clients. Those negative reactions demonstrate that Big 4 lost their brand name and reputation after Enron collapse.…”

Section: The Reforms Of the Audit Profession In France After The Law mentioning

confidence: 94%

Institutional Activism, Auditor’s Choice and Earning Management after the Enron Collapse: Evidence from France

Azibi¹,

Azibi²,

Tondeur³

2017

IBR

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This paper treats the relation between institutional shareholders, auditor's choice and earning management after the Enron collapse in French context. This context is characterized by the weak of investor protection compared to Common Law countries and the presence of the higher ownership concentration. Three hypotheses are tested around this question. The Empirical results demonstrate that institutional investor has more incentives to control the manager opportunism through the discretionary accruals and influence negatively the appointment of the Big 4 auditors after Enron collapse.

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“…This result demonstrates that the AA lost their reputation on audit market. Nelson et al (2008) have studied the reaction of firms audited by Arthur Andersen and Big Four in the oil industries. The empirical results show a significant negative reaction of Arthur Andersen clients versus the Big Four.…”

Section: Joint Audit and Financial Scandal: A Brief Reviewmentioning

confidence: 99%

“…According to Nelson et al (2008), the energy market was reacting negatively after the announcement of the Enron bankruptcy. Based on this argument, we use Oil variable, equal to 1 if the enterprise have oil and gas activity, 0 otherwise to detect the .…”

Section: Rit = ᾰI + βI Rmt + µIt (2)mentioning

confidence: 99%

Joint audit and financial scandal: The case of the French context

Azibi¹

2018

Int. j. adv. appl. sci.

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The European Commission issued a proposal that encouraged the practice of joint audit on a voluntary basis. It recommended that mandatory audit firm rotation is extended from six years to nine years if joint audits are performed. This is considered as a new mechanism that increases audit quality and auditor independence. This new orientation of the EC Green Paper has an important impact on investor perception during the financial scandal announcement. In order to answer this question, we investigate the stock market reaction of SBF 250 after the disclosure of the financial scandal in presence of joint audit. Our sample is composed of 140 French listed enterprises. We use event study method and OLS regression. The empirical results demonstrate that the stock market of Non Big-Four clients does not significantly react compared to the firms audited by at least one Big Four in France. Contrary to this finding, the stock market reaction of the firms audited by two Big Four was significantly reacted compared to the enterprises audited by one Big at least in France. Those results demonstrate that joint audit with at least one Non-Big encouraged and especially in the Financial scandal periods and resolve the problem associated with the audit market concentration.

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The market reaction to Arthur Andersen's role in the Enron scandal: Loss of reputation or confounding effects?

Cited by 108 publications

References 28 publications

The Case Analysis of the Scandal of Enron

The Case Analysis of the Scandal of Enron

Institutional Activism, Auditor’s Choice and Earning Management after the Enron Collapse: Evidence from France

Joint audit and financial scandal: The case of the French context

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