This study presents a model predicting that stock price responses to firms' disclosed accounting earnings are an increasing function of firm-specific risk and a decreasing function of external reporting system noise. Linking these predictions to incentive problems related to managers' investment and external disclosure decisions, the study derives and empirically tests the research hypothesis that the earnings response coefficient of manager-controlled firms is smaller than that of owner-controlled firms. To test this hypothesis, regression analyses were conducted using quarterly disclosed earnings and daily stock price data from U.S. firms over a three-year period, yielding results consistent with the research hypothesis. These results persisted even after controlling for size effects and industry effects. In addition to the aforementioned predictions, the model presented in this study demonstrates that information quality affects stock prices, which contradicts the prevailing view in accounting that information quality itself is irrelevant to valuation because it does not directly affect a firm's cash flows. Furthermore, the empirical results of this study are inconsistent with the view that the managerial labor market and the market for corporate control would fully discipline managers' self-interested behavior. The findings suggest that at least in manager-controlled firms, unresolved agency problems exist, and that prices determined in efficient capital markets reflect these unresolved agency problems.