Abstract The article reports that recent developments in finance, particularly the construction of the portfolio and efficient capital markets theories, proved to have a significant impact on accounting research. Among the major questions currently being examined is the relationship between financial statement and market-determined risk measures with the objective of inferring from the extent and timing of such a relationship the usefulness of accounting information for investment decision making. Available research generally indicates the existence of a weak to moderate association between accounting- and market-based risk measures, while very little evidence is available regarding the ability of accounting data to improve risk measurement and hence portfolio selection. Thus, both the positive and normative questions remain to a large extent unanswered, and more research in the area is obviously warranted. The objective of this study is to draw attention to a set of financial statement measures which according to organization and production theorists reflect some basic risk characteristics of the firm.
Lev et al. (Mon,) studied this question.