ABSTRACT
Market based research' in accounting has become well established over the past 25 years. The main focus of study has been how share prices react to various 'events' or 'signals'. The behavioural research studies have essentially focused on the interpretation by analysts of certain accounting messages, the aim being to see which of them are regarded as signalling likely failure. The approach adopted in order to study share price behaviour prior to impending bankruptcy is a variation of the standard procedures developed in so-called 'event studies'. In order to explore further the importance of prior knowledge of the incidence of failures in a population, Casey conducted another experiment using as subjects 109 loan officers in US banks. The data to which they were exposed related to a sample of 49 companies, of which only 15 had failed. The errors were systematically lower, but the groups exposed to the faces once again performed best.
