财务会计理论—Chap4Efficient3a capital market_edit.pptVIP

Summary Efficient securities market theory has major implications on financial reporting. Under ECM, specific accounting policies does not matter if there is no cash flow effects across policies, and provided full disclosure. Role of financial reporting is to reduce estimation risk, resulting in share price closer to fundamental value Information Approach to Decision Usefulness * * * Note now is the random walk theory * * * * *  * * Forward-looking information, such as financial forecast (encouraged but not required). * IFRS HKFRS 8 operating segments: managerial approach consistent with the above. See HKICPA package IAS 14: Segment Reporting * * * * Understanding the Securities Market: Efficient Securities Markets and Accounting  (Scott - Chapter 4) Major topics Efficient securities market theory and its implications on accounting policies financial reporting Information asymmetry / The role of capital market Logical inconsistency of costly information and fully informative prices Financial reporting and information asymmetry Full disclosure Market Efficiency Overview Efficient market hypothesis (EMH): an early attempt by accountants to relate theories to reality Past Prices Public Inform. All information Efficient Securities Market Market efficiency: one where the prices of securities traded “properly reflect” the “specific” information about those securities Market price will quickly adjust to new information once information publicly available Rational investors revise beliefs about future returns as soon as new information becomes publicly known. Efficient Securities Market – Weak Form Weak-form efficiency: market is efficient with respect to the information about the past price performance of the securities: Implications: Stock price is random walk. Cannot predict whether the stock price will rise or not in the next step. Fall or rise with equal chances. Random Walk Theory The movement of stock prices from day to day DO NOT reflec