Accounting Research Essay Example | Topics and Well Written Essays - 1500 words

Accounting Research - Essay Example However, there has been considerable criticism on accounting research pointing to the fact that it has been ineffective in putting much impact on the world. The assumptions upon which the accounting research mainly relies have been playing a great role in contributing to lessening its relevance in real market situations.This paper provides criticism on several aspects of research in accounting theory that strengthen the argument suggesting its ineffectiveness. It also presents the aspects of accounting research that have been helpful in real market scenarios.Research on accounting theories is considered to have a significant impact on individual perception, earning and distribution of wealth, allocation of social resources and the direction for improvement in accounting reporting as well as standards. Accounting research has a very significant role to play in enlightening accounting professionals about several key measures such as earnings, investor reaction probabilities, stock pric e movements etc. It does not only influence the economic aspect of individuals and corporations but can also affect the whole society by means of earning distribution and wealth allocation. Baker suggests that "throughout society, the influence of accounting permeates the fundamental issues concerning wealth distribution, social justice, political ideology and environmental degradation." (2000, p375) It is because accounting is an important field economically, socially and also environmentally, the research in this subject can help determine major modes of action for professionals. The impact of the research in the field of accounting theory has however been little on the world. There seem to be several views and dimensions of accounting research that lack practicability and relevance when it comes to practical world. The assumptions and the directions that the accounting research adopted has hampered its way to prove its application on real markets. The most significant of these aspects is the Efficient Market Hypothesis. The Efficient market hypothesis constitutes a great deal of accounting research and is considered to be one of the most significant accounting theories. However the fact is that this theory is still considered to be hypothesis because of its unrealistic relevance to reality. There is no market in the world that could serve to validate this hypothesis. The accounting research on efficient market i.e. relation between information and market price movement has failed to have a considerable impact on the world (Gaffikin, 2007). It is simply beca use of the fact that the assumption this theory relies on has less relevance to the real world. The markets that are completely efficient characterised by immediate investor reaction to new information is simply idealistic. This is why this theory has failed to have any significant impact on real markets. Accounting research has exhibited profound emphasis on the assumption that investors react rationally to information and take economically rational decisions. Accounting theories, for instance, the capital market research and Efficient Market Hypothesis rely on the assumption that investors respond rationally to new information however there has been significant evidence that investors mostly act irrationally (Gaffikin, 2007). In the event that investors act irrationally to the new information, it is not possible to apply these theories to the real situations going on in the market. However, these theories along with this assumption can be useful in evaluating the