Accounting Theory Question
What is positive accounting theory? how does it differ from normative accounting theory? what was/were the major dissatisfaction(s) with normative accounting theory which led to the development of a positive theory accounting? 2. Explain the meaning of an efficient market. what is meant by the following terms: weak-form efficiency, semistrong-form efficiency, strong-form efficiency? which form is the most important to accounting research? why?
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Explain the important of examining the impact the profit on share prices for financial analysis. can this analysis be used to make abnormal returns from the share markets? 4. Does study of the information content of profits announcements explain why firms use particular accounting practice? does it help to predict which firms will use particular accounting practices? 5. Give reasons that non-linear model relating unexpected returns to share prices would provide a more precise estimate of the earnings response coefficient (ERC). .
Why would share prices have a greater reaction to the profit announcement released by small firm compared with those released by large firms? do you think this research has any implications for ‘measurement’ issues in accounting or for formulation of accounting standards? 7. outline the research that has been undertaken on the impact of permanent and temporary increases in profits. why is this research important? 8. how will risk and uncertainty affect the valuation of a firm and, through this valuation model, the ERC? . The impact of profits for valuation has diminished over the years. what is the impact? how was the research adjusted to reflect this fact? 10. Outline a research project which explain how share prices are determined. would this project include factors other than accounting data?
Briefly explain the outline the research of ‘mechanistic ‘hypothesis’. what are the implications of the research? 12. Why would financial analysis be fooled by accounting numbers and provide optimistic and biased estimates of profits? an you offer a positive economic reason for their actions? 13. outline the different procedures that can be used to determine whether accounts have quality accruals or whether they create more noise. 14. what are the two main explanations for the association between the choice of high-quality auditor and a lower cost of debt or equity capital? 15. why do we have to be carefull drawing conclusions about causality based on studies using archival data?