MD&A disclosure and the firm's ability to continue as a going concern
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
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- Accounting
- 3502 Banking, finance and investment
- 3501 Accounting, auditing and accountability
- 1501 Accounting, Auditing and Accountability
Citation
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Accounting
- 3502 Banking, finance and investment
- 3501 Accounting, auditing and accountability
- 1501 Accounting, Auditing and Accountability