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A year ago
What are the implications of the efficient market hypothesis for corporate managers?
Textbook 

Corporate Finance: The Core

Edition: 4th
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wrote...
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A year ago
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A manager seeking to boost the price of her firm's stock should make investments that increase the present value of the firm's free cash flows.

Many managers make the mistake of focusing on accounting earnings as opposed to free cash flows.

With efficient markets, the accounting consequences of a decision do not directly affect the value of the firm and should not drive decision making.

With efficient markets, the firm can sell its shares at a fair price to new investors.  Thus, the firm should not be constrained from raising capital to fund positive NPV investment opportunities.
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