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Unit information: Accounting and Capital Markets in 2016/17

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Unit name Accounting and Capital Markets
Unit code EFIMM0010
Credit points 15
Level of study M/7
Teaching block(s) Teaching Block 2 (weeks 13 - 24)
Unit director Dr. Korczak
Open unit status Not open
Pre-requisites

ECONM2028 International Financial Accounting

Co-requisites

none

School/department School of Accounting and Finance
Faculty Faculty of Social Sciences and Law

Description

The module's aims are to provide a critical examination of the role of accounting information in capital markets and to focus on the theoretical and empirical evidence on how accounting information is used in investment decisions. In addition, the module examines how accounting can resolve information asymmetries between capital providers and management, thus addressing the stewardship and contracting roles of accounting information.

Intended learning outcomes

On completion of the module, students should be able to:

  • Appraise accounting information through a capital market lens
  • Critically discuss the academic research on the use and usefulness of accounting based valuation models
  • Understand how accounting information is analysed in the broader industrial and economic context
  • Use and evaluate accounting-based models in the estimation of credit default risk
  • Understand how financial statements are used in contracts between capital providers and managers
  • Critically evaluate the potential conflicts that can arise between the contracting and valuation roles of accounting information

Teaching details

The unit will be taught on-site to full-time postgraduate taught masters students.

15 hours of lectures supported by 5 hours of fortnightly tutorials

Assessment Details

Formative Assessment

This will be part of the formal teaching activities where students will be encouraged to debate the usefulness and limitations of accounting information in capital market decisions. Students will be required to present their own work in seminars, In addition the course coordinator will be available at advertised times to answer queries and discuss progress with students.

Summative Assessment

All unit learning outcomes will be met through a closed book exam. Students will sit a 3 hour closed book examination to assess their skills of analysis, synthesis and evaluation and will examine the extent to which they have met the module learning outcomes, The examination paper will include numerical questions which require the students to use the theoretical and technical material from the module to solve problems and to evaluate their solutions; and essay questions designed to enable students to demonstrate their understanding of the theoretical, technical and empirical literature covered on the module.

Reading and References

Core text:

  • Palepu, K. G., & Healy, P. M. (2007). Business analysis and valuation. Cengage Learning Emea.

This is a research-led unit and therefore there will be a reliance on seminal and current research papers.

Additional reading:

  • Barker, R. (2001) Determining Value FT Prentice Hall.
  • Barth, M. E., Beaver, W. H., and Landsman, W. R. 2001. The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of Accounting and Economics, 31(1–3): 77-104.
  • Beyer, A., Cohen, D. A., Lys, T. Z., and Walther, B. R. 2010. The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics, 50(2): 296-343.
  • Callen, J. L. 2009. Shocks to shocks: A theoretical foundation for the information content of earnings. Contemporary Accounting Research, 26(1): 135-166.
  • Feltham, G.A., Ohlson, J.A., 1995. Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research, 11, 689–731.
  • Holthausen, R. W., and Watts, R. L. 2001. The relevance of the value-relevance literature for financial accounting standard setting. Journal of Accounting and Economics, 31(1–3): 3-75.
  • Kothari, S., Ramanna, K., and Skinner, D. J. 2010. Implications for GAAP from an analysis of positive research in accounting. Journal of Accounting and Economics, 50(2): 246-286.
  • Lambert, R. A. 2001. Contracting theory and accounting. Journal of Accounting and Economics, 32(1): 3-87.
  • Ohlson, J. A. 1980. Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18: 109-131.
  • Ohlson, J.A., 1995. Earnings, book values, and dividends in equity valuation. Contemporary Accounting Research 11: 661–687.
  • Ohlson, J.A., 2009. Accounting data and value: The basic results. Contemporary Accounting Research 26: 231–259

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