In the context of capital market research what is the importance of Literature review

In the context of capital market research what is the importance of published financial information and the information content - Literature review Example Moreover, it has been proved that financial information and information content of earnings have the power to affect the investors’ decision making process. The interaction between the overall model of investor’s decision making and the published financial information, as well as the information content of earnings, is critically discussed in this paper. The justification of the above model in the context of the current financial crisis is evaluated. In order to secure that all the issues discussed above are covered, the paper has been divided into several sections, highlighting the various aspects of this paper’s subject. Apart from the introduction section, where the overall scope of the paper is presented, of particular importance are the literature and the Discussion sections. In the literature review section the following issues are addressed: the key characteristics of market research and its value on financial reporting, the published financial information and the information content of earnings as factors influencing investors’ decision making and potential use of the model of investors’ decision making within modern market which is under the continuous pressures of global financial crisis. The value of the literature findings in the context of the present crisis are further analyzed in the Analysis and Discussion section, so that valid assumptions are developed in regard to the study’s key subject. In the last section of the paper, Conclusion and recommendations, the key findings of the research developed for the issues addressed in this paper are summarized and recommendations are made, as appropriate, so that future failures are avoided. 2. Literature Review 2.1 Market research – characteristics and relation with financial reporting Market research is employed in a variety of business activities. For example, when having to decide in regard to the entrance of the business in a new market or in regard t o the development of a new product/ service market research is used for gathering information related to the host market or the consumer preferences as related to the new product/ service (Wahlen et al. 52). In regard to financial reporting and investment decision making, market research has a similar role. It helps to gather information required in developing a firm’s financial statements so that the position of the firm and its competitiveness is made clear (Wahlen et al. 52). Market research can be developed through a high range of research methods, such as surveys and field studies (Wahlen et al. 52). Preferably, market research should be based on empirical research methods, aiming to show the current market trends in regard to one or more critical business sectors. Capital market research is part of market research, it its broad meaning. Capital market research focuses on the review of ‘value-related information, such as share prices’ (Wahlen et al. 52). At this point it would be necessary to explain the key context of financial reporting, as a key activity in all organizations. Carmichael, Whittington and Lynford note that financial reporting is a process ‘for gathering information that will be used by investors or creditors for developing their investment or credit decisions accordingly’ (Carmichael, Whittington and Lynford 62). In general, financial reporti