The Capital Market Theory and Its Implications for Accounting

Abstract

Over the last few decades there has been a considerable amount of research efforts relating to capital market efficiency. The implications of efficient markets

for accounting have been discussed in various studies. Capital market theory

and the related evidence have contributed a foundation for investment and financial reporting debate. Despite the fact that market efficiency has been refuted by some writers, the efficient market hypothesis is accepted by many researchers, and the Financial Accounting Standards Board also recognizes its significance for accounting theory. Much of this literature, however, is technical and highly complex. Theories and implications of the literature may not be fully understood by the accounting profession, causing a lack of awareness of and a nonuniversal acceptance of this research espite that capital market theory merits wider attention.