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AFF5150 Financial Reporting Issue Topic 1 Capital Market Research slides are either from or adapted from Rank al. (2012), Contemporary issues in accounting. Wiley. and Deegan (2009), Financial accounting theory (3rd ed.). North Ryde, NSW: McGraw-Hill Australia. Learning Objectives 1. Def he efficient markets hypothesis and outl he assumptions of market efficiency; 2. Understand the role of capital markets research in ex ining the association between accounting information and share prices; 3. Be aware of the differenc ween capital market research that looks at the information content of accounting disclosures, and capital market research that uses share price data as a ben ark for evaluating accounting disclosures 4. the major results of capital market research into financial accounting and disclosure Capital market research (CMR) • Understand the role of accounting and other financial information in equity markets • Examine statistical relations between accounting and/or other financial information and share prices • Change in share prices evident of investors’ reactions on particular accounting and/or financial information • No share price change may imply no reaction to particular information Reasons for capital market research (CMR) • Information about earnings and its components is the primary purpose of financial reporting • Earnings are oriented towards the interests of shareholders or investors • Earnings is the number most ysed and forecast by security ysts • Reliable data on earnings is readily available Underlying assumption of CMR— Efficient Market Hypothesis • CMR relies on the assu