Saturday, September 7, 2019
Strategic Financial Management Essay Example | Topics and Well Written Essays - 1000 words - 1
Strategic Financial Management - Essay Example The market prices absorb the security prices rapidly, as early as the information on the organisations is available in the market. As per the efficient market hypothesis, the market efficiency refers to both the magnitude and direction of the price amendments. This is done by absorbing the new information available in the market. Different intensities of the market efficiency have led the capital markets to be segmented into different efficiency forms. The efficiency level of an efficient market can be of three types; weak form efficiency, semi strong form efficiency. Capital markets have weak form efficiency of the current securities prices in it reflect certain historical information. The semi strong efficient markets reflect the past price movement in the securities and at the same time represent all currently available public information. The strong form capital markets reflect all the public and privately available information related to the securities. However, the analysis her e would consider the characteristics and behaviour of the strong efficient capital market. One of the typical financing decisions of a firm includes decisions on the issuance of the equity and debt securities. The implication of an efficient capital market means that the market prices reflect all the available information needed to have a fair pricing of all the existing securities. As the purchasing and selling of securities take place at the prevailing market price, the transaction would never result in a positive net present value.