2bc
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QUESTION 2 (b) Explain whether Brahim Holdings’ expansion can influence the expected return and prediction of its share price. Yes, Brahim Holdings’ expansion can influence the expected return and prediction of its share price because once KLIA2 is opened, it is able to handle triple the passenger capacity of the previous LCCT, so the earnings of Brahim Holdings will increase. The increase of earnings will also cause the profit increase as well; therefore, the growth of profit is able to increase the expected return and also the prediction of share price because the investor is willing to invest in a company with growing profit. (4 Marks) (c) Elaborate how positive research evidence in the share price changes may alternatively result in the disclosure of accounting information. Dye (1985) and Verrecchia (1983) suggest that managers reveal news about firm value which favorably affects stock price, and withhold news which adversely affects price. Therefore, positive research evidence in the share price changes is more likely disclosed by manager in accounting information to attract the investor to invest in the company. (4 Marks) 1
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Transcript of 2bc
QUESTION 2
(b) Explain whether Brahim Holdings expansion can influence the expected return and prediction of its share price.Yes, Brahim Holdings expansion can influence the expected return and prediction of its share price because once KLIA2 is opened, it is able to handle triple the passenger capacity of the previous LCCT, so the earnings of Brahim Holdings will increase. The increase of earnings will also cause the profit increase as well; therefore, the growth of profit is able to increase the expected return and also the prediction of share price because the investor is willing to invest in a company with growing profit.(4 Marks)
(c) Elaborate how positive research evidence in the share price changes may alternatively result in the disclosure of accounting information. Dye (1985) and Verrecchia (1983) suggest that managers reveal news about firm value which favorably affects stock price, and withhold news which adversely affects price. Therefore, positive research evidence in the share price changes is more likely disclosed by manager in accounting information to attract the investor to invest in the company.(4 Marks)
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