1. ‘Managers generally have superior information to outside investors about their company’s expected future performance.’ Discuss the above statement in a theoretical context. How does the managers’...

1. ‘Managers generally have superior information to outside investors about their company’s expected future performance.’ Discuss the above statement in a theoretical context. How does the managers’ superiority in information affect the efficiency of the financial market? To what extent does this affect the attitude of managers in terms of voluntary disclosures?

2. Discuss the question of whether investors, when pricing a security (e.g. in the case of initial public offerings), value the auditor’s ability to provide an insurance role. Discuss this in the context of the relationship between the insurance hypothesis and auditor liability status (limited liability). Explain the link with securities’ prices in the flotation.