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MD&A disclosure and the firm's ability to continue as a going concern

Publication ,  Journal Article
Mayew, WJ; Sethuraman, M; Venkatachalam, M
Published in: Accounting Review
July 1, 2015

This paper explores the role of textual disclosures in the Management, Discussion, and Analysis (MD&A) section of a firm's SEC 10-K filing in predicting a firm's ability to continue as a going concern. Using a sample of firms that filed for bankruptcy between 1995 and 2012 to identify firms that cease as a going concern, we find that both management's opinion about going concern reported in the MD&A and the linguistic tone of the MD&A together provide significant explanatory power in predicting whether a firm will cease as a going concern. Moreover, the predictive ability of MD&A disclosure is incremental to financial ratios, market-based variables, and even the auditor's going concern opinion. We also find that the incremental predictive ability of MD&A disclosures extends to three years prior to bankruptcy.

Duke Scholars

Published In

Accounting Review

DOI

ISSN

0001-4826

Publication Date

July 1, 2015

Volume

90

Issue

4

Start / End Page

1621 / 1651

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability
 

Citation

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Mayew, W. J., Sethuraman, M., & Venkatachalam, M. (2015). MD&A disclosure and the firm's ability to continue as a going concern. Accounting Review, 90(4), 1621–1651. https://doi.org/10.2308/accr-50983
Mayew, W. J., M. Sethuraman, and M. Venkatachalam. “MD&A disclosure and the firm's ability to continue as a going concern.” Accounting Review 90, no. 4 (July 1, 2015): 1621–51. https://doi.org/10.2308/accr-50983.
Mayew WJ, Sethuraman M, Venkatachalam M. MD&A disclosure and the firm's ability to continue as a going concern. Accounting Review. 2015 Jul 1;90(4):1621–51.
Mayew, W. J., et al. “MD&A disclosure and the firm's ability to continue as a going concern.” Accounting Review, vol. 90, no. 4, July 2015, pp. 1621–51. Scopus, doi:10.2308/accr-50983.
Mayew WJ, Sethuraman M, Venkatachalam M. MD&A disclosure and the firm's ability to continue as a going concern. Accounting Review. 2015 Jul 1;90(4):1621–1651.

Published In

Accounting Review

DOI

ISSN

0001-4826

Publication Date

July 1, 2015

Volume

90

Issue

4

Start / End Page

1621 / 1651

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability