How Do Auditors Behave During Periods of Market Euphoria? The Case of Internet IPOs
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Weber_How do auditors.pdf
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Author(s)
Weber, Joseph P.
Rice, Sarah
Leone, Andrew J.
Willenborg, Michael
Date Issued
April 2012
Journal
Contemporary Accounting Research
Publisher
Wiley Blackwell
Citation
Leone, Andrew J. et al. “How Do Auditors Behave During Periods of Market Euphoria? The Case of Internet IPOs*.” Contemporary Accounting Research (2012).
Version
Author's final manuscript
Abstract
The study of periods of market euphoria, such as Holland’s seventeenth-century tulip
mania, England’s eighteenth-century South Sea Company, America’s nineteenth-century
railroads, or, most recently, the U.S. housing market, is a topic of long-standing interest to economists. Theorists specify conditions under which market participants and institutions cause "bubbles" to arise and persist and empiricists test participant-centric or institution- centric explanations (Hong, Scheinkman, and Xiong 2008; Schultz 2008; Greenwood and Nagel 2009). In this paper, we study a different participant other than one that stands to gain from price fluctuations. We are interested in how auditors behave during periods of market euphoria. Given their gatekeeper responsibility to act in the public’s interest, along with the seeming inevitability of bubbles (Rampell 2009), it is important to study how auditors behave during euphoric market conditions. To address this question, we examine auditor going-concern (GC) opinions around the time of the wave of stressed Internet firms filing to go public on NASDAQ, the capital markets entry point for the companies that went on to constitute "dotcom mania".
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.1111/j.1911-3846.2011.01146.x
