Audit opinions and information asymmetry in the stock market

This study analyses the relationship between the content of the audit reports and information asymmetry levels in the stock market for a sample of Spanish firms. By implementing an association study, we document (1) that firms with audit qualifications show higher information asymmetry levels than those with unqualified opinions; (2) firms with non-quantified qualifications show higher informational asymmetry than firms with quantified qualifications; and (3) we find a stronger effect on the level of informational asymmetry in the case of going concern qualifications. Our findings suggest that audit qualifications reporting more uncertainty on firm accounting statements result in higher adverse selection risk.David Abad acknowledges financial support from the Ministerio de Ciencia y Competitividad through grants ECO2013-44409-P and ECO2014-58434-P. Juan Pedro Sánchez-Ballesta acknowledges financial support from Fundación Séneca (15358/PHCS/10). José Yagüe acknowledges financial support from Fundación Caja Murcia