Chapter 10 - Reactions of capital markets to financial reporting P2 | Take the Quiz

A 'systematic change' in share prices will not be caused by the disclosure of new information about:

A. Inflation

B. Dividends

C. Business confidence

D. Unemployment

Positive abnormal returns following an earnings announcement suggests the announcement contained:

A. Good news

B. Unexpected good news

C. Bad news

D. Unexpected bad news

According to the findings of capital markets research, historic cost earnings information is:

A. Useful to investors

B. Useful to investors when it differs from expectations

C. Largely unknown by investors prior to announcement date

D. Manipulated by managers

According to the findings of capital markets research, the existence of Post-announcement abnormal returns for a given firm suggests that for firms in the same industry:

A. Subsequent post-announcement abnormal returns will increase

B. Subsequent post-announcement abnormal returns will decrease

C. There will be no effect on subsequent post-announcement abnormal returns

D. It is impossible to predict the effect on subsequent post-announcement abnormal returns

Which of the following is not a finding of capital markets research?

A. Earnings forecasts contain useful information

B. Voluntary disclosures benefit capital markets.

C. The strength of the relationship between earnings announcements and share price movements is positively related to the size of an entity

D. Financial statement disclosures are perceived differently to footnote disclosures

The book value is generally less than the market value of a firm because:

A. Capital markets are not strong-form efficient

B. Certain intangibles may not meet the asset recognition criteria

C. Assets may be overvalued by unethical managers

D. The market values of assets are difficult to measure

In addition to investigating the information content of earnings announcements, capital markets research has also considered whether:

A. Earnings announcements reflect information previously utilised by investors

B. Abnormal earnings announcements reflect information previously utilised by investors

C. Cash flow announcements reflect information previously utilised by investors

D. Abnormal cash flow announcements reflect information previously utilised by investors

Capital markets research suggests that:

A. Cash flows are a more useful measure of firm performance than earnings

B. Earnings are a more useful measure of firm performance than cash flows

C. Cash flows and earnings are equally useful measures of firm performance

D. None of the given options are correct.

Recent capital markets studies have:

A. Suggested capital markets are less efficient than previously believed

B. Confirmed previous beliefs about the efficiency of capital markets

C. Suggested capital markets are more efficient than previously believed

D. Not considered the efficiency of capital markets

Post-earnings announcement 'drift' is:

A. Consistent with the strong-form efficient markets hypothesis

B. Consistent with the semi-strong-form efficient markets hypothesis

C. The predictability of returns following earnings announcements

D. The predictability of abnormal returns following earnings announcements

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Chapter 10 - Reactions of capital markets to financial reporting P2

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