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Chapter 10. Written for the senior undergraduate accounting and postgraduate student, Financial Accounting Theory retains the same basic strengths that made its predecessor a market leader. It has a writing style that is easy to read and understand, includes critical evaluation and balanced discussion of different theories of accounting that will spark student interest. The book also develops analytical reasoning by challenging students to think about accounting issues at hand, and formulate opinions. The learning objectives of this chapter are to: (1) understand the role of capital market research in assessing the information content of accounting disclosures; (2) understand the assumptions of market efficiency adopted in capital market research; (3) understand the difference between capital market research that looks at the information content of accounting disclosures, and capital market research that uses share price data as a benchmark for evaluating accounting disclosures; (4) be able to explain why unexpected accounting earnings and abnormal share price returns are expected to be related; and (5) be able to outline the major results of capital market research into financial accounting and disclosure.