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Some Empirical Evidence to Support the Relationship Between Audit Reports and Stock Prices — The French Case
Author(s) -
Soltani Bahram
Publication year - 2000
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/1099-1123.00317
Subject(s) - audit , accounting , event study , auditor's report , business , sample (material) , empirical evidence , stock (firearms) , empirical research , stock market , information asymmetry , finance , geography , philosophy , context (archaeology) , chemistry , epistemology , chromatography , archaeology
Acting as an independent intermediary, the auditor facilitates market transactions by providing an ‘opinion’ on financial statements which should help to reduce the information asymmetry between the company and its potential investors. Whether audit qualifications have informational value to investors is a question that needs further investigation, as previous empirical studies on this issue yield mixed results. Moreover, a majority of the research papers in this area have been conducted in Anglo‐Saxon countries, in contrast to continental European countries where very little attention has been paid to the auditors' role in stock markets. The present study is based on a large sample of qualified opinions (543 for the period 1986–1995), using different expected event dates and market models. The results of the study demonstrate the significant negative abnormal returns around the announcement dates of audit opinions. The empirical part of this study was carried out in the French market which has some significant differences from the UK and the USA markets. The author believes that the differences, in the area of reporting, level of disclosure, and accounting and auditing practices, can play an important role in the research field of event studies.