Insider Trading, Litigation Concerns, and Auditor Going-Concern Opinions

ABSTRACT

We investigate whether insider selling affects the likelihood of firms receiving auditor going-concern opinions. Prior studies document significant negative market reactions to the issuance of going-concern opinions, indicating that such opinions convey bad news to investors. Insider sales followed by negative news are likely to attract regulators' scrutiny and investor class-action lawsuits. Therefore, we predict that, to reduce ...more