Financial Accounting Theory (5th Edition)

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Matt Steger Seminar#7 – The Information Perspective to Decision Usefulness September 15, 2009 In Chapter 5, Scott proceeds to explain how information and the decision theory relate by presenting a study that Brown made where trading volume reaction was examined. Scott tells us that the information content of financial information (specifically, net income) can be seen in the market reaction to that information as it relates to a firm’s security price. Nichols and Whalen, in their article for Accounting Horizons from 2004, also explain the relationship between financial information and stock returns. Scott opens up Chapter Five by defining the outline for the chapter through which he then proceeds. He begins his discussion through the information approach which “recognizes that individual responsibility for predicting future firm performance that concentrates on providing useful information for this purpose” (144). Scott then presents the reader his Outline of the Research Problem
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