According to Positive Accounting Theory,using Stock Prices to Determine Bonuses

question 6

Multiple Choice

According to Positive Accounting Theory,using stock prices to determine bonuses:

• A) Increases the likelihood of management disclosing good news
• B) Increases the likelihood of management disclosing of bad news
• C) Increases the likelihood of management disclosing both good and bad news
• D) Has no effect on the likelihood of management disclosures

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Definitions:

Market Movements

The collective shifts and trends observed in the pricing and valuation of securities within financial markets.

Earnings Potential

The maximum amount of money an individual or entity can expect to earn from their investments or job over a specific period.

Systematic Risk

The risk inherent to the entire market or market segment, also known as non-diversifiable risk or market risk.

Slope

In linear regression, the slope indicates the steepness and direction of the relationship between two variables, representing the amount of change in the dependent variable for a one-unit change in the independent variable.