Accounting Theory

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The major reason for why people invest in companies and purchase stocks is to generate profits. Stocks can be a very tricky and lucrative way to make money, and in order to potentially make a return on your investments investors need to look at the information that they have available to them and make a decision. Here now are types of information needed so that an investor to make a safe and comfortable decision. Financial information about a company that follows the conceptual framework of being comparable, verifiable, timely and understandable is a major part in the reviewing process by investors. The information that is available to potential investors plays an important role in the sense that if a company does not perform financially…show more content…
Information is always changing so companies continue to try to ensure investors have access to it and change the beliefs of investors in a positive way. Part 2 From research, we can develop a lot of theories based on our behaviours. Investors need to know the information about companies in order to make decisions. Investors constantly think about the future with information about the past. In essence all information disclosed in financial reports helps the investor make a decision with their investment and there are two theories that determine the effect of the issuance of these reports and the levels of activity and the trading prices: “Ball and Brown” and “Beaver” Ball and Brown depict the stock prices of companies on the days leading and subsequent to the announcement dates of annual reports. Depending on whether there is good news or bad news, we could see from the Abnormal Return for GN and BN Firms diagram (pg. 160) that the information given by companies to the investors does in fact have an impact on the value of the stocks of the companies and the trading of these securities. When there is Good News that is reported then there is a higher level of activity with the performance in the stock and when there is Bad News, there is negative performance in the stock activity. Also determined in this study is
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