The effect of critical audit matter disclosures on stock market: Financial analysts as information intermediaries
No Thumbnail Available
URL
Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Accounting
Language
en
Pages
45
Series
Abstract
In recent years, public demands for explanatory language in audit reports have led to the introduction of Critical Audit Matters (CAM) disclosures in audit report models in the United States. This study examines the effect of CAM disclosures on stock market, as well as the role of financial analysts in these disclosures. Specifically, I investigate whether CAM disclosures prompt market reactions and whether financial analysts’ discussions of CAM-related issues during the earnings conference calls moderate these reactions. Using US public companies from 2016 to 2021 as a sample, I find that CAM disclosures are associated with significant stock market reactions, proxied by abnormal trading volume, abnormal returns, abnormal variance, and abnormal bid-ask spread. Furthermore, I find that financial analysts moderate the impact of CAM disclosures. Overall, this study suggests the informativeness of CAM disclosures and highlights the importance of financial analysts as information intermediaries in the capital market. These findings have practical implications for regulators and standard-setters who aim to mitigate information asymmetry and enhance investor understanding. This study also has a broader impact on society to enhance the public confidence in financial disclosure transparency, and has theoretical implications to complement existing literature about CAM disclosures and financial analysts.Description
Thesis advisor
Sihvonen, JukkaKeywords
critical audit matters, audit report, market reaction, financial analyst