Chapter 3The Widening Chasm between Financial Information and Stock Prices

How to Measure the Usefulness of Financial Information

The information in corporate financial reports has various audiences: third parties contracting with the company (lenders, suppliers), labor unions, government, and regulatory agencies, among others. But capital market investors are undoubtedly the predominant group of financial information users. This is made clear by the 1933–1934 Securities Acts and the many Securities and Exchange Commission (SEC) regulations and enforcement actions that are aimed at ensuring that corporate financial reports both inform and protect investors. The Financial Accounting Standards Board (FASB)—the US standard-setter of accounting and reporting ...

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