Abstract
SUMMARY In this study, we examine the reaction of financial analysts to the events associated with the collapse of Enron and Arthur Andersen. We present evidence that the change in the frequency of downward revisions from the pre-Enron to Enron period was incrementally higher for Andersen clients than for a control sample of matched Big 4 clients. We also find evidence that Andersen clients had incrementally larger forecast errors and greater forecast dispersion than the matched control firms. Our results suggest that the damaging news about Andersen led to an abnormal increase in uncertainty about other Andersen-audited financial statements, which affected analysts' forecast activity and properties. More generally, our results suggest that analyst behavior is tempered by the analyst's perception of audit quality.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
