Economic consequences(PPT 18)

DIFINITION
Zeff (1978): the impact of accounting reports on the decision making behavior of business, government and creditors
The essential of the concept is that the accounting policy choice can affect the firm value. The is an opposite view to the implication of EMH.
Management is ignored in EMH while emphasized in economic consequences.
If a change of accounting policy affect the interest of management it will also have influence on the investors directly.
All accounting policy will matter despite lake of cash flow effects
why economic consequence is important?
Many of interesting events in accounting practice derive from EC
Accounting choice doesn’t matter is odds with practice experiences.
The research on the reasons of EC leads to several important accounting theory branches.

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