دانلود رایگان مقاله واکنش بازار به شگفتی درآمد پس از اولین تعدیلات رفتن - نگرانی

abstract

This study investigates the market's response to earnings surprises after first-time going-concern modifications (GCMs). Using a sample of 581 firms and an events-study research design, we document a significant decrease in earnings response coefficients (ERCs) in the quarters following the GCM. However, this result appears to be driven by firms for which the GCM is unexpected. Specifically, we find that firms with high Z-scores prior to the GCM experience an immediate and prolonged decline in ERCs over the four quarters after the GCM, but find no change in ERCs for those firms with low Z-scores. These results are consistent with the GCM potentially resolving investors' fundamental uncertainty about future cash flows, and/or signaling that the earnings numbers generated by the firm are noisier or less persistent than was previously assumed. Further, we find no change in ERCs for a propensity-score matched control sample that did not receive GCMs, suggesting that the decline in earnings informativeness is not a response to general economic conditions. Finally, we document that institutional investors incorporate the information in the GCM. The study makes an important contribution to the going-concern literature by documenting that GCMs influence the pricing of earnings.

6. Conclusion

In this study we investigate the effect of auditors' first-time GCMs on the informativeness of earnings by assessing the market's responsiveness to earnings surprises subsequent to GCMs. Using quarterly data we document a shift in ERCs after firms receive first-time GCMs. Our results for the full sample indicate a delayed and long-term (three quarter) decrease in ERCs, implying that while investors are slow to react to the unambiguous bad news signal in GCMs, the market appears to view subsequent earnings surprises to be of lower quality. However, the results appear to be driven by the sample of unexpected GCMs. Specifically, we document a significant decrease in ERCs for all four post-GCMs filing quarters, suggesting a timely and prolonged decrease in earnings informativeness for the unexpected GCM firms. On the other hand, we find a short-term decrease in ERCs, delayed to the second post-GCM quarter, and a subsequent recovery to pre-GCM levels over quarters t+3 and t+4. Our results imply that the GCMs provide information to investors that potentially reduces ex ante uncertainty about firm value, signals that firms' earnings are noisier and/or are less persistent, and that the revision horizon is shorter than was previously assumed, particularly when investors may be unable to accurately predict the probability of receiving a first-time GCM based on publicly available information. We also document that the change in ERCs does not appear to be a function of general economic performance since we find no change in ERCs for a propensity-score matched set of control firms. Finally, similar to Menon and Williams (2010) we find that sophisticated investors act appear to incorporate the new information in GCMs in their responses to subsequent earnings surprises. Our study provides important evidence that investors appear to incorporate the information in GCM in revising earnings expectations, leading to a decrease in the informativeness of future earnings signals. Thus the study makes an important contribution to the going-concern literature by documenting that GCMs influence the pricing of subsequent earnings.