Evidence on risk changes around audit qualification and qualification withdrawal announcements

Article Abstract:

The hypothesis that disclosure of a qualification to an audit report is related to a rise in risk of a company if such qualifications focus on changes in company risk which are substantial was investigated. Initial findings indicated no change in systematic risk around qualification reports. However, further study indicated that companies reporting recurring material risks have larger levels of systematic risk than companies reporting initial qualifications.

Asset & Risk Management, Methods, Analysis, Risk assessment, Risk (Economics), Auditing

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The leverage effect in individual stocks and the debt to equity ratio

Article Abstract:

A study investigates the existence of the 'leverage effect' in individual stock returns and the relationship of this effect to the debt-to-equity ratio. Data for the study are drawn from 30 individual firms included in the Dow Jones Industrial stock price index. The results show that the leverage effect exists in all cases in the sense that volatility is found to increase more as a result of negative innovations than of positive innovations.

Stocks, Ratio analysis

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Initial technical violations of debt covenants and changes in firm risk

Article Abstract:

Research is presented concerning the relationship which exists between initial technical debt covenant violations and the equity risk of violating business enterprises. Unsystematic and systematic risk are discussed.

Debt & Equity Securities, Securities, Risk management, Debt

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