Tuesday, March 26, 2019
DanielleFirst, efficient marketplace theory implies that the market fully reflects the available information and react readily to any new information. In fact, good or bad intelligence information related to account elucidate income is usually evaluated rationally by investors and right off reflected the market share terms. Indeed, under an efficient market, this reflected market price depart meet the price predicted by the investors and that why in some cases we handbill no reactions to the earning performance whether it is good or bad.Second, sometimes there no considerable or even a reversed reaction to transmute in the stock price for the news related to reported profits income and that is due to an other event rather internal or outside(a) taking place in the same period that affects the market behavior towards the investors behaviour. To illustrate, if a company working in gas and petroleum perseverance deal have a reducing in its stock price because of a new environmental low (future expenses) even with the release of a higher net income.Finally, there is also the fact that the investors have reliable expectation toward the upcoming net income scarce in case that the reported net income doesnt overcome their expectations , even though the income is positive, investor wont react to these news .In fact, a company that posts a very impressive earnings performance, except its stock price barely moves because the investors had already expected these results and the reported net income just confirm these expectations.RobertThe inefficient market hypothesis consists on a market behaviour that sometimes drive asset prices above or below their true value. In fact, the existence and magnitude of certain stock price variations are sometimes incompatible with an eff... ...te earnings and in this situation, investors can have an idea about the level of accrual persistence so they can take the best decision towards that.Applying the Accounting p rinciples framework would be an efficient way to increase the persistence of accruals.To illustrate, the timely recognition and mesurebility of accruals would decreae the anomalies specially if they are implemented and disclosed to the public using the right method.The non specie assets and the non cash liability such as goodwill and future tax income obligation are more easily to manipulate than the cash flow. In fact, in order to increase the accruals persistence, these non cash flows items show follow a certain regulation. Indeed, Accounting provisions for impairment related to any decrease in value of these items or any affirmable loss but also posing a restrictive rule for any possible gain.