The Effect of Laverage, Profitability and Cash Flow On Going Concern Audit Opinion and Its Implications On Market Reaction

Abstract

This study examines going concern audit opinions and their implications for market reactions. The going concern audit opinion received by the Company was based on an analysis of financial performance which indicated that the Company was experiencing financial distress, causing substantial doubts in carrying on its business and impacting market reaction. The variables used are leverage, profitability and cash flow as independent variables, going concern audit opinion as intervening variables and market reaction as dependent variables. The sample for this research comes from companies listed on the Indonesia Stock Exchange (IDX) for 2018-2021 and are included in the IDX special notation list on June 20 2022. The sampling technique uses purposive sampling. The results showed that leverage had a significant positive effect on going concern audit opinions, profitability and cash flow did not have a significant effect on going concern audit opinions. Leverage has a significant positive effect on market reaction, profitability and cash flow has a significant negative effect on market reaction. Going concern audit opinion has negative implications for market reaction. And going concern audit opinion is able to mediate the relationship of cash flow variables to market reaction, but has not been able to mediate the relationship of leverage and profitability variables to market reaction.