Impact of Going-Concern Audit Opinion On Cost of Equity with Institutional Ownership as Moderation

Abstract

This study aims to examine whether goingconcern audit opinion and 2i nstitutional3 ownership' measured by the? percentage of institutional ownership affect the cost of equity, and whether institutional ownership moderates the impact of going-concern audit opinion on cost of equity. From regression using a 1.428 annual report from 2011-2016, with a capital asset pricing model method to measure the cost of equity, this study found a positive relationship between goingconcern audit opinion and the cost of equity, that is, if the company receives a 3goi ng-concern? 1 audit^H opinion{ , Vt he-cost CofB equity will increase. 4Goi ng-concern> "audit; _opi nion+ reflects risks to 3t he4 company, thereby increasing the company's cost of equity. This research also finds that institutional ownership has a negative impact on cost of equity; thus, the higher the percentage of institutional ownership in a firm, the lower the company's cost of equity. In moderation testing, this study finds that institutional ownership weakens the positive impact of Jgoing-concern4 Laudit opinion? on cost Nof] equity. MT his; can be Ldue3 2t o1 institutional investors monitoring the company's performance; thus, the company can improve its performance in order to minimize the possibility of getting a going-concern audit opinion.

Going Concern Audit Opinion and Market's Reaction

“…The study found a significant impact on Abnormal trading volume, but an insignificant impact on Abnormal return. in examining the impact of going concern audit opinion on the cost of equity in Indonesia Yulfa and Fitriany (2019) found that the cost of equity increases when the firm receives a going concern audit opinion. Although we have mentioned some of many studies that found a negative market reaction to the release of going concern audit opinion, many other studies did not find a significant effect of going concern audit opinion on the market; Silva et.…”