Market Efficiency, Accounting Information and Stock Prices

Capital market efficiency plays a major role in a country’s economic development, as it affects capital formation, resource allocation and the distribution of wealth among market participants. This paper reviews previous studies to provide an understanding of the concepts of capital market efficiency. In addition to explaining the various forms of capital market efficiency, this paper discusses in depth the market efficiency of emerging economies, specifically in Malaysia. Prior studies show that accounting regulations, institutional infrastructure, quality of information disclosure are among factors that determine the extent of market efficiency. The paper further emphasizes that accounting information plays a significant role in determining market efficiency, especially in the Malaysian context which is scarcely explored by prior studies within the milieu of emerging markets.