QUESTION 1:

What assumptions about market efficiency are typically adopted in capital markets research? What do we mean by 'market efficiency'?

QUESTION 2:

Evidence shows that share prices might not fully react to financial accounting information immediately and that abnormal returns might persist for a period of time following the release of information (a case of 'post-announcement drift'). Does this indicate that securities markets are not efficient and that assumptions about market efficiency should be rejected?

QUESTION 3:

What, if any, effect would the size of an entity have on the likelihood that the capital market will react to the disclosure of accounting information?

QUESTION 4

In their article entitled "Voluntary forward-looking statements driven by corporate governance and their value relevance" Wang & Hussainey (2013) conclude that "the voluntary disclosure of forward-looking statements related to corporate governance helps investors to better anticipate future earnings."

a) Briefly summarise the arguments that Wang & Hussainey put forward to support this investigation.

b) In your opinion, how do you think that this study may be beneficial to managers?