Abstract This research investigated investor reactions to auditors' decisions concerning unusual uncertainties. Individual, rather than market, reactions were investigated in order to capture effects that can often be masked by price-based aggregate market methods. This was accomplished by an examination of trading volume over 30 trading days surrounding the announcement of the nature of audit opinions for 66 matched pairs of firms during the period 1973-1977. Examinations included comparisons between experimental and control groups of firms for each day, and also for an information release period, compared with control periods when no similar information was issued. Statistically significant portfolio adjustments were discovered when uncertainty qualifications first appeared, and again when they were removed, and the reactions lasted longer than those normally reported in price-based research into the information content of accounting-related information. The results provide evidence that auditors' decisions and reports concerning uncertainties affect individual investors' portfolio holding decisions.
Keller et al. (Thu,) studied this question.