| Popis: |
We investigate the incremental market reaction to first-time going concern audit reports (GCARs) relative to similarly distressed non-GCAR firms. We utilize a matched-sample research design to show that first-time GCARs are associated with incremental negative abnormal returns and increases in market-adjusted share turnover at the annual report filing date. Moreover, our results indicate that greater net selling by institutional investors (i.e., institutional flight) during the fiscal year increases the magnitude of these associations. We also find that first-time GCARs signal an increased likelihood of bankruptcy and weaker operating performance in the subsequent year, and that institutional flight prior to the GCAR moderates the severity of these signals. Taken together, our findings provide new evidence that first-time GCARs are incrementally informative beyond other financial statement information, and that the informativeness of the auditor’s GCAR decision is moderated by the observed trading decisions of institutional investors. |
