6533b855fe1ef96bd12b1122

RESEARCH PRODUCT

The Stock Market Reaction to the Enron-Andersen Affair in Spain

subject

description

2Universidad Jaume I de Castellon This paper investigates whether listed Spanish companies audited by Andersen have suffered any negative economic impact due to the scandal surrounding Andersen’s work in Enron Corporation. To that end, we have measured the economic consequences, if any, of Andersen’s loss of reputation by examining the reaction in terms of movements in the stock prices of its client companies using an event study methodology. We have analysed abnormal returns on the stock prices of all firms listed in the Spanish Interconnected Market around two event dates: the date of Andersen’s public admission that it had destroyed significant financial documents related to Enron Corp. and the date Dynegy Inc. announced the withdrawal of its takeover offer. The results of our empirical analysis do not support the hypothesis that companies audited by Andersen suffered any significant drop in stock price as a result of the scandal affecting their auditor.