3. Effects of GCOs in Italy: Some Empirical Evidence

The literature related with financial reporting events (such as earnings forecast, annual reports releases, financial plan, takeover, merger announcements etc.) is controversial. The main issue arises to confirm whether and to what extent those events affect stock market returns. As regards audit reports release and their impact on the stock market, many studies attempted overtime to capture the magnitude of these phenomena. This chapter aims at exploring the same phenomenon. I use the Event Study methodology (ES) to test whether GCOs impact on stock returns of firms listed at the Italian stock exchange, from 2008 to 2014, alongside the financial crisis. Findings are partially in line with previous studies shedding a light on the negative impact of GCOs on stock market returns, signalling a certain degree of value relevance. The main novelty is that Italian investors reacted (on average) negatively even when GCOs are attached to clean opinions. According to Carson et al (Audit A J Pract Theory 32(1):353–384, 2013) categorization, this research falls in full among studies aimed at detecting consequences of GCOs for shareholders. Moreover, the location matter of the study seems particularly useful because only another study (Ianniello and Galloppo in Manag Audit J 30(6/7):610–632, 2015) has detected the impact of GCOs on stock market returns in Italy.