An implication of the efficient markets hypothesis (EMH) is that managers will choose accounting policies in order to influence reported net profit.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis suggests that markets are efficient and all available information (including accounting policies) is already reflected in the stock price. Therefore, managers cannot influence reported net profit through accounting policies as investors will already have incorporated that information into their decisions.

An Implication of the Efficient Markets Hypothesis (EMH) Is That