Business Commons^™

Accounting Quality, Stock Price Delay And Future Stock Returns, Hai Lu, Jeffrey Callen, Mozaffar Khan

Research Collection School Of Accountancy

ln frictionless capital markets with complete information and rational investors, stock prices adjust to new information instantaneously and completely. However, a substantial body of research studies information imperfections such as asymmetric information and incomplete information. Information imperfections potentially hinder timely price discovery and are likely associated with delayed stock price adjustment to information. Our first research question therefore is whether the quality of accounting information (or ”accounting quality”) is one such information imperfection that is associated with cross-sectional variation in stock price delay. We define accounting quality as the precision with which financial reports convey information to equity investors about …