In this chapter we read that, on the one hand, financial reporting standards are meant to prevent capital markets from breaking down due to less informed investors withdrawing from the market because they consistently lose out to better informed investors. In other words, financial reporting standards are meant to make capital markets more informationally efficient. On the other, fully informationally

Chapter 1, Exercises #7

In this chapter we read that, on the one hand, financial reporting standards are meant to prevent capital markets from breaking down due to less informed investors withdrawing from the market because they consistently lose out to better informed investors. In other words, financial reporting standards are meant to make capital markets more informationally efficient. On the other, fully informationally efficient capital markets will break down due to a lack of incentives to gain an informational advantage and invest. So, how would a society decide the optimal level of informational efficiency? Is this a technical or a political problem?

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!
Related Book For answer-question

International Financial Reporting And Analysis

8th Edition

Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn

ISBN: 9781473766853