Empirical Research On The Market Reaction To Audit Opinion In The Capital Market

A major output of an audit is the audit opinion. According to China's Independent Auditing Standards, audit opinion is classified into qualified opinion and unqualified opinion. The paper does empirical research on that the event of audit opinions issued by Certified Public Accountants impacts on capital market.Focusing on capital reaction to unqualified opinions, this paper analyzes the investors'reaction to the stock price when they are informed that the companies they invested have been issued by the unqualified opinions.Based on the analysis of the audit opinion and the relationship between it and its capital markets, the text descriptively sums up the listed companies which are issued audit opinions, and analyzes its characteristics. In empirical studies, the day published in the annual report is the event day, and the research method is based on that of Mikkelson & Partch. The study observation period for the events is the day before and after 15 days, with a total of 31 days. This essay selects 265 unqualified opinions in the year 2005, 2006 and 2007 annual reports as samples and analyzes the average cumulative abnormal return to examine whether unqualified opinions issued by Certified Public Accountants have an impact on the stock profits.The empirical study of this article is divided into four parts. First, the significance level of average accumulative abnormal return in the all unqualified opinions is tested. Second, the significance level of average accumulative abnormal return in infringing accounting standards,infringing audit scope,going concern,stressing other important proceeding unqualified opinions is tested respectively. Third, the significance level of average accumulative abnormal return for the first time appearance unqualified opinion is tested. In the end, the significance level of average accumulative abnormal return in the continuity style unqualified opinions is tested.The result of the empirical research is as follows. When unqualified opinions are issued, there is information of content. Although there won't be an immediate negative impact on stock prices, it will drop in the 10 days after the event day with significant abnormal return, which can be reflected as a slow response of unqualified audit opinions to the capital market.