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| Author: | Baber, W. Kumar, K. Verghese, T. |
| Title: | Client security price reactions to the Laventhol and Horwath bankruptcy |
| Journal: | Journal of Accounting Research
1995 : AUTUMN, VOL. 33:2, p. 385-396 |
| Index terms: | ACCOUNTING RESEARCH CLIENTS SECURITY |
| Language: | eng |
| Abstract: | On November 21, 1990, Laventhol and Horwath (LH), then the nation's seventh-largest public accounting firm, filed for protection under Chapter 11 of the U.S. Federal Bankruptcy Code. A portfolio of 75 LH client common stocks earned statistically significant risk-adjusted returns of -1.91% during the two-day trading period around the LH bankruptcy disclosure. The authors propose and investigate two explanations for these security price reactions. The insurance explanation presumes investor reliance on auditors to recover future investment losses. |
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