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- Title
Synergy between Accounting Disclosures and Forward-Looking Information in Stock Prices.
- Authors
Arya, Anil; Mittendorf, Brian; Ramanan, Ram N. V.
- Abstract
It is well recognized that stock prices provide relevant feedback that can guide future firm decisions. This paper develops a model to examine how accounting disclosures affect the decision-usefulness of such stock market reactions. We demonstrate that information in accounting reports can prove useful because it helps observers better interpret and isolate the decision-relevant information embedded in the ensuing stock price reaction. This leads to natural synergies between accounting reports and stock prices in directing firm strategies--the more forward-looking information that can potentially be gleaned from stock prices, the more the firm will invest in improving precision of accounting disclosures even when such disclosures pertain to unrelated current activities.
- Subjects
FINANCIAL disclosure; STOCK prices; FINANCIAL statements; DECISION making in business; MARKET equilibrium
- Publication
Accounting Review, 2017, Vol 92, Issue 2, p1
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/accr-51527