Do going concern opinions provide incremental information to predict corporate defaults?

Elizabeth Gutierrez, Jake Krupa, Miguel Minutti-Meza, Maria Vulcheva

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


Investors, regulators, and academics question the usefulness of going concern opinions (GCOs). We assess whether GCOs provide incremental information, relative to other predictors of corporate default. Our measure of incremental information is the additional predictive power that GCOs give to a default model. Using data from 1996 to 2015, initially we find no difference in predictive power between GCOs alone and a default model that includes financial ratios. However, there is an imperfect overlap between GCOs and other predictors. We show that GCOs increase the predictive power of several models that include ratios, market variables, probability of default estimates, and credit ratings. Using a model that includes ratios and market variables, GCOs increase the number of predicted defaults by 4.4%, without increasing Type II errors. Our findings suggest that GCOs summarize a complex set of conditions not captured by other predictors of default.

Original languageEnglish (US)
Pages (from-to)1344-1381
Number of pages38
JournalReview of Accounting Studies
Issue number4
StatePublished - Dec 1 2020


  • Audit quality
  • Going concern opinions
  • Predictive accuracy
  • Type I and II errors

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)


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