Case study Essay Example | Topics and Well Written Essays - 1750 words - 10

Case study - Essay Example Studies have revealed that organizations encountering environmental crisis generally endeavour to recuperate their legitimacy by amplifying their environmental disclosures inside their annual reports. An investigation of the corporate disclosures subsequent to a major environmental crisis is likely to provide additional understanding regarding the strategies and accounting theories implemented by such companies. This paper illustrates the legitimacy theory related to corporate disclosure and assesses the practices and activities adopted by BP following its ‘Gulf oil spill crisis’. The legitimacy theory illustrates the rationale behind the revelation of environmental information by corporate organizations. Legitimacy theory states that corporate firms must think about the rights of the society on the whole, and not merely focus on that of their investors. If the firms do not seem to function within the limits of the conduct considered suitable by the society, then the society will take actions to hamper the firm’s right to carry on its business operations. When there is a definite and possible inconsistency amid the business as well as the social value systems, it will result in intimidations to organizational legitimacy in context of economic, legal, and other authorizations (Prabhu 1998; Neu et al. 1998). Neu et al. (1998) opined that the legitimacy of a company is built and preserved by means of symbolic action, which act as elements of the company’s public image. This paper would evaluate the disclosure patterns as well as BP’s strategies following the crisis related to the ‘Gulf of Mexico oil spill’. In April, 2010, a fire explosion took place in the ‘Deepwater Horizon oil rig’, ultimately sinking the vessel and spilling 4.9 million barrels of oil into the Gulf of Mexico, until the well was lastingly plugged. This incident resulted in the death of 11 people, while gravely injuring 17 persons. The event had serious

Definition of Efficient Market Hypothesis Literature review

Definition of Efficient Market Hypothesis - Literature review Example In the realm of financial markets, the value of information is indispensable. It is through the data that most analysts gain more information regarding the market. Market behavior is generally characterized by the flow of information. Therefore, comprehending the data that comes in and out of the market is vital. Through this information, analysts are able to predict prices and movements in the market. In addition, the data that is observed in the market generate perspectives that allow practitioners to forecast long-term movements in the components of financial markets. Although financial markets are hard to grasp, there are suggestions that such markets function with efficiency. Efficiency, when referred to the market, pertains to the changes in price and exchange between buyers and sellers. Apparently, financial markets are highly valued because investors are more inclined with fast-paced forms of revenue generation. Most important, the efficiency of the market makes decision making less risky and more rewarding. Eugene Fama (1970) was the main innovator of the Efficient Market Hypothesis (EMH). EMH implies that financial markets are efficient such that the price of assets, stocks, and other securities reflect all information available; thus, provide an unbiased view of investors regarding future prospects. One important aspect that EMH asserts is that it is seemingly impossible to outperform the market through the use of information known to the market. The information as defined by EMH refers to the data that are unpredictable in the present and appears sparingly in the future. EMH is considered as a fundamental component of modern financial economics (Feinstein, 2000). A compelling view of EHM was provided by Bodie et al. (1996) describing it as a result of rigorous underpinning and supported extensive empirical work. Bowman and Buchanan (1995) identified EMH as meticulously formulated. It is clear that the process in supportive concepts for a developed and competitive securities market. Several executives, however, pointed out some inconsistencies with EMH. These arguments are indeed supported by studies involving various subjects. The essence of EMH has embedded on the information associated stocks and the prevailing price associated with these securities. Malkiel (1987) stated that the varying point of views being presented by the buyers and sellers represent all the information and from the pool, relevant data are gathered. Indeed, the price of stocks will be affected by unexpected news, which of course is still unknown to the investors. There is a natural relationship between markets that efficiently provide available information to their role in efficient market distribution (Stiglitz, 1981). Further studies, on the other hand, pointed out that markets that provide efficient information are not required to provide productive efficiency in the economy. Such description supports tendencies when the market is incomplete and information that is considered as differentiated is costly but valuable. It is understandable that some data appear to be useless. But investors have been creative in creating a sense in this information.