The Economic Consequences of Financial Reporting In Chapter 1, we introduced the concept of economic consequences. Income measurement and financial reporting also involve economic consequences, including the following: -Financial information can affect the distribution of wealth among investors. More informed investors, or investors employing security analysts, may be able increase their wealth at the expense of less informed investors. - Financial information can affect the level of risk accepted by a firm. As discussed in Chapter 4, focusing on short-term, less risky projects may have long-term detrimental effects. - Financial information can affect the rate of capital formation in the economy and result in a reallocation of wealth between consumption and investment within the economy. - Financial information can affect how investment is allocated among firms.