In denial? Stock market underreaction to going-concern audit report disclosures
We investigate the stock price reaction to UK going-concern audit report disclosures in the calendar year subsequent to publication. Over this period our firm population underperforms by between 24% and 31% depending on the benchmark adopted. This market underreaction to such an unambiguous bad news...
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| Veröffentlicht in: | Journal of accounting & economics 2004-12, Vol.38 (1), p.263-296 |
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| container_title | Journal of accounting & economics |
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| creator | Taffler, Richard J. Lu, Jeffrey Kausar, Asad |
| description | We investigate the stock price reaction to UK going-concern audit report disclosures in the calendar year subsequent to publication. Over this period our firm population underperforms by between 24% and 31% depending on the benchmark adopted. This market underreaction to such an unambiguous bad news release is not a post-earnings announcement drift phenomenon; it is also robust to other potentially confounding explanations. However, whatever the reasons for such stock mispricing, we find costly arbitrage prevents rational investors forcing prices back into line with fundamental value. Our results have implications for the market's ability to impound bad news appropriately and the incompleteness of arbitrage in such small “loser” firm situations. |
| doi_str_mv | 10.1016/j.jacceco.2004.09.004 |
| format | Article |
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Our results have implications for the market's ability to impound bad news appropriately and the incompleteness of arbitrage in such small “loser” firm situations.</description><subject>Accounting</subject><subject>Arbitrage</subject><subject>Auditing</subject><subject>Behavioral finance</subject><subject>Bias</subject><subject>Disclosure</subject><subject>Earnings</subject><subject>Financial reporting</subject><subject>Investor biases</subject><subject>Investors</subject><subject>Limits to arbitrage</subject><subject>Market anomalies</subject><subject>Mathematical models</subject><subject>Rates of return</subject><subject>Statistical analysis</subject><subject>Stock exchange</subject><subject>Stock prices</subject><subject>Studies</subject><subject>United Kingdom</subject><issn>0165-4101</issn><issn>1879-1980</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2004</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><recordid>eNqFkEFL5DAUx4PsgrOuH0EIHvbWmjRNm55kkd11QPCweg6Z5FVTO8lskgp-e9844sHLQl8fhN__8edHyBlnNWe8u5jqyVgLNtYNY23NhhrXEVlx1Q8VHxT7QlbIyapF_Jh8y3liSDSKrcjtOlAHwZv5kv4t0T7RrUlPUOgSHKQExhYfAy2RPkQfHiobg4UUqFmcLzTBLqZCnc92jnlJkL-Tr6OZM5y-7xNy__vX3dV1dXP7Z33186ay7SBLpTaml3xkm5Hb3rZYjhnZC2PURqpm03etcV3XtIOQg1HgnGRN5-Q4MtfjOHFCfhzu7lL8t0AueoslYJ5NgLhkLRRTXAmO4PkncIpLCthNN1ww3iopEJIHyKaYc4JR75JHES-aM713rCf97ljvHWs2aFyYWx9yKALsRwgAJoNs0M9aGKHw94LzlhTG4-C32790QjdDpx_LFm9dHm4Banv2kHS2HtC28wls0S76_7R5BdA2oH0</recordid><startdate>20041201</startdate><enddate>20041201</enddate><creator>Taffler, Richard J.</creator><creator>Lu, Jeffrey</creator><creator>Kausar, Asad</creator><general>Elsevier B.V</general><general>Elsevier</general><general>Elsevier Sequoia S.A</general><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20041201</creationdate><title>In denial? 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Stock market underreaction to going-concern audit report disclosures</atitle><jtitle>Journal of accounting & economics</jtitle><date>2004-12-01</date><risdate>2004</risdate><volume>38</volume><issue>1</issue><spage>263</spage><epage>296</epage><pages>263-296</pages><issn>0165-4101</issn><eissn>1879-1980</eissn><coden>JAECDS</coden><abstract>We investigate the stock price reaction to UK going-concern audit report disclosures in the calendar year subsequent to publication. Over this period our firm population underperforms by between 24% and 31% depending on the benchmark adopted. This market underreaction to such an unambiguous bad news release is not a post-earnings announcement drift phenomenon; it is also robust to other potentially confounding explanations. However, whatever the reasons for such stock mispricing, we find costly arbitrage prevents rational investors forcing prices back into line with fundamental value. 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| fulltext | fulltext |
| identifier | ISSN: 0165-4101 |
| ispartof | Journal of accounting & economics, 2004-12, Vol.38 (1), p.263-296 |
| issn | 0165-4101 1879-1980 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_38081831 |
| source | RePEc; ScienceDirect Journals (5 years ago - present) |
| subjects | Accounting Arbitrage Auditing Behavioral finance Bias Disclosure Earnings Financial reporting Investor biases Investors Limits to arbitrage Market anomalies Mathematical models Rates of return Statistical analysis Stock exchange Stock prices Studies United Kingdom |
| title | In denial? Stock market underreaction to going-concern audit report disclosures |
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