The article discusses efficient market empirical research literature in relation to accounting information. The studies discussed in the article questioned the frictionless nature of the hypothesis as usually expressed. The authors believe that efficient-markets research in relation to financial accounting is the most important thrust made by accounting researchers in the past decade. By its very nature, empirical research is time consuming and messy. Furthermore, conclusions are always subject to reservations.

Intelligent corporate financial planning has been necessary for as long as the corporate form of business enterprise has existed. Only in recent years, however, have computer technology and academic theorizing been harnessed to meet this practical need. Without wishing to minimize the impact and value of these efforts on the practice of corporate finance, we do think there are grounds for believing that the new finance “tools” have been less than maximally effective. In this article we contrast typical financial modeling theory in order to interpret the gap between the two. Then we describe a financial policy model whose characteristics might be expected to be more acceptable in practice. Finally, we discuss the implications of the theory/practice gap and our experience with this model for future scholarly activities in the modeling of financial policies.