The Role of Accounting Information in Economic Decision-Making: A Market-Based Theoretical Perspective

Abstract

ccounting information is a central determinant of economic decision-making that guides investor choice, capital resource allocation, and market efficiency. This article is an integrative market-based theoretical framework that synthesizes concepts from agency theory, signaling theory, and information economics to address how accounting information shapes economic outcomes. The methodology uses conceptual synthesis through secondary sources in top-impact journals. The findings indicate that accounting information plays multifaceted roles such as mitigating information asymmetry, improving governance, and enabling correct valuation. Tables and models present the differential application of accounting information by investors, creditors, and managers, and its fit with decision theory. The evidence also highlights the mediating influence of institutional variables like audit quality and regulatory requirements. This theoretical model improves insight into accounting's effect on firm-level and macroeconomic choices. The findings provide implications for practice, policy, and future research in a fast-changing financial reporting landscape.