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Audit opinions and information asymmetry in the stock market

2015; Wiley; Volume: 57; Issue: 2 Linguagem: Inglês

10.1111/acfi.12175

1467-629X

David Abad, Juan Pedro Sánchez‐Ballesta, José Yagüe,

Financial Markets and Investment Strategies

Abstract This study analyses the relationship between the content of the audit reports and information asymmetry levels in the stock market for a sample of S panish firms. By implementing an association study, we document (1) that firms with audit qualifications show higher information asymmetry levels than those with unqualified opinions; (2) firms with non‐quantified qualifications show higher informational asymmetry than firms with quantified qualifications; and (3) we find a stronger effect on the level of informational asymmetry in the case of going concern qualifications. Our findings suggest that audit qualifications reporting more uncertainty on firm accounting statements result in higher adverse selection risk.