Abstract

This study aims to understand the role of capital market research in assessing the information content of accounting disclosures, the assumptions of market efficiency adopted in capital market research, the difference between capital market research that looks at the information content of accounting disclosures, and capital market research that uses stock price data as a benchmark for evaluating accounting disclosures, be able to explain why unexpected accounting earnings and abnormal stock price returns are expected to be related and to describe the main results of capital market research in financial accounting and disclosure. Conclusions about market reactions to certain released information or events are based on general evidence from a large number of companies, with data spanning several years. This type of research is often used to examine equity market reactions to corporate information announcements, and to assess the relevance of accounting choices and alternative disclosures for investors. If the price of a security changes around the time of the release of certain information, and assuming that information and not some other event causes the price change, then it is considered that the information is relevant and useful for investment decision making.