Impact of Audit Results on Stock Prices of Russian Corporations

The aim of this study is to assess the impact of the audit reports issuance on the value of public corporations’ shares on the Russian stock market. The practical significance and relevance of this research are due to the increasing role of audit in the financial market and the lack of such investigations in the domestic scientific literature. The author put forward two hypotheses. According to the first, unmodified audit reports influence the stock market positively, whereas modified ones have a negative effect. In accordance with the second assumption, the Russian stock market responds similarly to identical types of audit opinions, regardless of the relevance of the audit organization that expressed the opinion, to the group of the Big4 companies. The study is based on the market model and applies the Event Study approach. The sample includes 505 audit reports received from 2014 to 2018 by companies whose shares are listed on the Moscow Stock Exchange. The research evaluates the reaction of the Russian stock market to the publication of audit reports containing various types of audit opinions. The study takes into account the type of an audit organization that has expressed an opinion, namely its relation to the Big4 group. The results of the study demonstrated that the reaction of the stock market is rather chaotic. The hypotheses were not confirmed. The results were evaluated as statistically insignificant at a 5% level of confidence. This may be due to the insufficient level of development of the stock market and the fact that the assumption about the average efficiency of the financial market is not fair for Russia. The results obtained using the Event Study approach may be insignificant, since the issuance of audit reports is regular in Russia. The study showed that the use of Event Study is not suitable for all the observations in the sample in case of Russia and it is necessary to continue studying this issue using other methods and approaches.