Abstract
Mr. Mlynarczyk's study deals with a very significant area of accounting and I find his results intriguing. As he points out, rejection or acceptance of the main hypothesis' has important implications with respect to resource allocation in the economy. However, there are also other significant implications which, from the accountant's vantage point, are closer to home. The first of these concerns the role of the code chosen to communicate accounting information and its effect on the decoding process, i.e., the interpretation of financial statements by investors. The second implication, which is closely connected to the first, has to do with the dissemination of information in financial markets, especially in relation to the independent audit and current investment regulations. As you know, the spirit of financial market regulation is basically to prevent manipulation by special interest groups and to facilitate equal disclosure to all investors in a manner which is not misleading to the average investor. The preceding questions will be considered in some detail, but before doing so I shall comment very briefly on the more concrete aspects of the study. On the whole, I find Mr. Mlynarczyk's study well done. The background material is adequately covered and his choice of industry, from the point of view of the larger question, is very appropriate. The model also seems quite acceptable. The chief determinants of stock prices appear to be included among the independent variables: in the electric utility industry, business risk is probably safely excluded. As to the multiplicative form of the model, it is probably, on the basis of current
Published Version
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