MD&A disclosure and the firm's ability to continue as a going concern
Journal Article (Journal Article)
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.
Full Text
Duke Authors
Cited Authors
- Mayew, WJ; Sethuraman, M; Venkatachalam, M
Published Date
- July 1, 2015
Published In
Volume / Issue
- 90 / 4
Start / End Page
- 1621 - 1651
International Standard Serial Number (ISSN)
- 0001-4826
Digital Object Identifier (DOI)
- 10.2308/accr-50983
Citation Source
- Scopus