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AN EMPIRICAL EXAMINATION OF THE IMPACT OF LIMITED REVIEW ON EQUITY PRICES
Author(s) -
Fabozzi Frank J.,
Fonfeder Robert,
Casabona Patrick
Publication year - 1983
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1983.tb00416.x
Subject(s) - earnings , equity (law) , audit , accounting , sample (material) , economics , empirical examination , business , actuarial science , political science , chemistry , chromatography , law
SEC Accounting Series Release No. 177 required independent auditors to make a limited review of summarized quarterly data included in annual reports. This paper examines the reaction of investors to earnings announcements based on financial statements subject to limited review relative to announcements when no auditor involvement was required. The reaction of market participants is measured by an abnormal daily return metric of the common stock surrounding the published earnings announcement in The Wall Street Journal. As hypothesized, no difference in investor reaction is observed for the sample of firms subject to limited review for the 1977 fiscal year, but exempt in the 1976 fiscal year.