Do auditors' opinions, industry factors and macroeco(5)

财务危机预警文献,仅供学习研究

by independent auditors, and then recognize investment profits under equity method. Since the earnings quality of these non-audited financial statements is questionable, investment profits and earnings for such companies could have been overstated. Furthermore, even if a company’s investment income from related parties has been audited by other auditors, risk of overstating investment income is still fairly high. Among other reasons, the company’s auditor may not have sufficient knowledge to objectively evaluate the integrity of investment income. Besides, the auditor may not bother to perform a careful audit upon such items, considering the auditor can reduce its litigation risk by signing opinions which state that long term investment is audited by other auditors. Therefore, it is interesting to examine whether “no auditor” and “other auditor” have incremental contribution in predicting bankruptcy in Taiwan. Unlike firm-specific information, industry-level factors and macroeconomic factors have been rarely studied in bankruptcy prediction literature. In fact, three categories of factors influence a firm’s survival. They operate at the firm level, industry level and economy level (Everett and Watson 1998). However, prior bankruptcy prediction models are mostly based upon firm level factors (e.g., financial ratios, stock information), ignoring factors in both the industry and economy levels. In this study, we empirically examine whether the incorporation of industry level factors and macro-economy level factors can enhance the performance of bankruptcy

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