Although there has been a substantial number of studies on the capital
market impact of accounting policy decisions,
there has been limited progressin addressing the many research problems that arise in this area.
This paperillustrates how testing explanations (theories) for a capital market impact occurring,
as opposed to testing for the existence of a capital market impact.
can substantially add structure to key aspects of the research design e.g.. when predicting what the magnitude of the capital market impact should bc and when that effect should be detectable in capital asset prices.
whenselecting the sample of firms to examine and when controlling fol
confounding events.