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| Author: | Taffler, R. J. Lu, J. Kausar, A. |
| Title: | In denial? Stock market underreaction to going-concern audit report disclosures |
| Journal: | Journal of Accounting & Economics
2004 : DEC, VOL. 38:1-3, p. 263-296 |
| Index terms: | arbitrage bias disclosure stock markets United Kingdom |
| Language: | eng |
| Abstract: | This paper explores the stock price creation to UK going-concern audit report disclosures in the calendar year subsequent to publication. Over this period the firm population underperfomrs by between 24% and 31% depending on the benchmark adopted. This market underreaction to such an unambiguous bad news release is not a post-earnings announcement drift phenomenon; it is also robust to other potentially confounding explanations. However, it is shown that costly arbitrage prevents rational investors forcing prices back into line with fundamental value, whatever the reasons for such stock mispricing. |
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