Financial distress and going concern disclosure: the case of Italian listed companies

‘Going concern’ refers to a company’s ability to continue functioning as a business entity. This principle, provided by accounting standards, is the basis of valuation principles applied to individual items of the financial statement and is particularly at stake in times of financial distress like the current one. Consequently, supervisory bodies specifically require information on the going concern risk and the relative assessments made by management. Moreover, going concern appears to be closely related to revenue management issues since, for instance, financially constrained firms are more susceptible to revenue management problems. A consistent stream of research has recently been devoted to a number of revenue management issues directly related to the going concern assumption (such as economic concerns, customer perception, competition, etc.). That said, the purpose of this paper is to understand – through a qualitative analysis of the consolidated financial statements of Italian listed companies – how Italian listed companies that declared themselves as going concerns provide going concern disclosure and whether their disclosure reflects their real economic and financial situation (so-called management disclosure behavior).