Course Description

The course ‘accounting theory’ provides an introduction to empirical research on the relation be-tween capital markets and financial statements. We first provide an overview of the broad area of market-based accounting research. In doing so, we mainly focus on the following topics:

• concept and measurement of the constructs ‘information content’ and ‘value relevance’ of accounting numbers (i.e. ‘decision usefulness’ of accounting numbers)
• determinants of market reactions to accounting news
• alternative accounting performance measures
• different valuation/return models (DCF, Price and Return Models, CAPM, etc.)
• tests of market efficiency with respect to accounting information
• the role of accounting information in fundamental analysis and valuation

Since our focus is on archival studies, we also explore and discuss basic research design issues that must be considered when conducting empirical studies in the accounting/finance area. For this purpose, we will mainly focus on:

• the introduction to the statistical software package STATA
• the repetition of the classical linear regression model and its underlying assumptions
• the consequences and remedy of the violation of some of the classical assumptions
• the estimation of basic linear regression models and the statistical interpretation of the results