The Initial Going-concern of Delisting Firms: An Application of Proportional Hazard Model

  • Chi-Chen Wang National Defense University
  • Yueh-Ju Lin Kainan University
  • Yunsheng Hsu National Chung Hsing University


This paper examines the survival period and the factors of business failure of firms who have been issued with an initial going concern opinion (IGCO) by auditors. Empirical results show that financial variables are not significant predictors for future delisting crisis, but the corporate governance variables are especially for firms under deteriorating financial condition. Important factors causing the higher rate of delisting risk include shorter listing years, lower rate of retained earnings to total assets, lower rate of market value of equity to total debts, and higher rate of pledged shares of directors’ and supervisors’ within 7.5 quarters after the IGCO issued, the number of delisting firms reaches its peak, consistent with the existence of self-fulfilling prophecy. The hazard delisting function first rises to a peak at the 38th quarter and then declines rapidly, showing that after the disclosure of IGCO, first nine years is the delisting crisis period for Taiwan public firms.

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