Corporate Financing and the Lessons of Market Efficiency.pptVIP

Topics Covered Investment Decision vs. Financing Decision Market Efficiency Weak form efficiency Semi-strong form efficiency Strong form efficiency Lessons of Market Efficiency Investment vs. Financing Investment decision are made based on the risk of the project, with total disregard for how the project will be financed (flotation costs being the exception). Financing decisions are made based on the conditions in the capital markets, with little consideration for the investment being made (project specific funding being the exception. IRBs are a good example). Market Efficiency Market Effici