The free market perspective of accounting regulation suggests that accounting

The free market perspective of accounting regulation

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1. The free-market perspective of accounting regulation suggests that accounting information: A. Should be provided free of charge B. Should be provided like any other good that is subject to demand and supply C. Will require regulation to avoid underproduction of information
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Other anti-regulation (free-market) arguments Other possible incentives to disclose financial information include markets for:
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2. Which of the following is not assumed by the ‘market for managers’ argument for reducing or eliminating regulation? A. The managerial labour market operates efficiently B. Information about past management performance will be known by other prospective employers C. Managers will always try their best D. Managers are not approaching retirement
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3. Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice? A. An under-performing firm will be taken over by another firm, which will then subsequently replace the current management team B. Managers will be motivated to maximise the firm’s value to minimise the likelihood that outsiders could seize control C. Management will know the marginal cost and benefit involved in producing the optimum amount of information required to minimise the firm’s cost of capital
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4 . In the absence of regulation, the ‘market for lemons’ perspective assumes that: A. Firms have incentives to disclose both good and bad news B. There is no incentive for firms to disclose bad news C. No news is good news
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The ‘pro - regulation’ perspective Accounting information is a public good
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5. It is argued by the pro-regulation supporters that accounting information is a public good.
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  • Fall '16
  • Ian Thomson

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