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| Author: | Nelson, K.K. Price, R.A. Rountree, B.R. |
| Title: | The market reaction to Arthur Andersen's role in the Enron scandal: Loss of reputation or confounding effects? |
| Journal: | Journal of Accounting & Economics
2008 : DEC, VOL. 46:2-3, p. 279-293 |
| Index terms: | auditors reputation event studies earnings stock returns oil prices |
| Language: | eng |
| Abstract: | The study tests the hypothesis that negative client stock returns following the revelation that Enron documents had been shredded are attributable to confounding effects as opposed to a loss of Andersen's reputation. It is found that a sharp decline in oil prices along with differences in the industry composition of the Andersen and Big 4 client portfolios combine to produce significantly more negative returns for Andersen clients relative to Big 4 clients, and for Andersen's Houston office clients relative to its clients in other locations. Furthermore, the market reaction to two other Enron-related events offers little support for a reputation effect. It is cautioned that the results can not be interpreted as evidence that Andersen's reputation did not suffer as a result of the Enron events. |
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