The value relevance of expected vs. unexpected going concern opinions

Emiliano Ruiz-Barbadillo, Andrés Guiral

Research output: Contribution to journalArticle


Previous event studies find that going concern opinions (GCOs) convey significant information to the market when the audit reports appear to be unexpected. Using the value relevance method, this paper examines the differential impact of expected and unexpected going concern opinions on the market value of US firms for the 2000-2006 time period. The results suggest that while both firms receiving expected and unexpected GCOs suffer a drop in their average market value, the decrease is larger in the case of firms with unexpected GCOs. It is also observed that the market tends to shift the weight they place on earnings to the book value of equity in valuing firms with unexpected GCOs. Specifically, the decrease in the pricing multiple of earnings is larger for the case of unexpected GCOs. This result suggests that GCOs are more informative when they are unexpected. The study complements existing work by exploring whether expected GCOs have any differential valuation impact than unexpected GCOs instead of looking at the informativeness of GCOs alone.

Original languageEnglish
Pages (from-to)47-65
Number of pages19
JournalInvestment Management and Financial Innovations
Issue number2
Publication statusPublished - 2019 Jan 1

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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