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9 Cards in this Set
- Front
- Back
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What are the two primary qualities that make financial information useful?
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Relevance & Reliability
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According to Kinney, what question does empirical accounting research address?
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"Does how we as a firm or as a society account for things make a difference?"
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What does Kinney mean when he says "the accounting researcher must separate the underlying economic event from the report of the event"?
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He means that not only must an accounting researcher be concerned with firm characteristics, he must also be concerned with the costs and benefits of alternative accounting reports of those characteristics
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(From Kinney) What is the difference between “principals” and “surrogates” in accounting research?
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The difference between the principal and real-world observable variables presents difficulties for accounting researchers since accounting measurements may be either surrogates for some underlying principal of interest of may be the principal itself.
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(From Kinney) What is the most common contemporaneous factor a researcher must control for when using a firm’s stock price as a dependent variable?
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The most common Z factor in accounting research studies involving stock prices is the market return (Rm)
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Ingberman & Sorter, quoting a study by Ball and Brown, say that financial statements do not rate highly as a timely medium. What do they mean?
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They mean that the events reported in the F/S are generally anywhere btw 1 & 15 months old by the time they are released and that either 1) the events have already been revealed elsewhere, or 2) they should have been bc by the time the F/S appear they represent stale news
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(From Ingberman & Sorter) If stock price already reflects financial statement information before the statements are released, of what use are financial statements?
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I&S submit that financial statements can play an important role in reaching investment decisions. They believe that the new statements enable each investor to adjust his forecasting model, and that his unpredictable reactions will depend on his own model and preferences.
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Define relevance (i.e. relevant info)
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Relevant information is capable of changing a user’s decision.
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Define reliability (i.e. reliable info)
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Reliable information measures what it is supposed to measure.
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