ABOUT BOOK

Purpose This study aims to explore the effects of intellectual capital (IC) on the occurrence of a modified audit opinion decision. The authors expect that high IC intensive firms are positively associated with the occurrence of a modified audit opinion since they are associated with an increased business risk and are more likely to exhibit issues concerning their financial health and stability. Design/methodology/approach Using a data sample of 423 listed firms from Greece, Italy, Spain and Portugal over a 10-year period, the authors estimated a logistic regression model to examine the effects of IC on the probability that a modified audit opinion is issued. The authors used organizational capital as a measure of a firm’s intensity on IC. Findings Empirical findings indicate a significant and positive relationship between the IC and the likelihood of a firm receiving a modified audit opinion decision. Originality/value This study expands prior literature by exploring the predictive ability of IC on the likelihood of a firm receiving a modified audit opinion decision.