Management Responses to Current Stock Prices
The Business Review, Vol. 18, Number 1, September 2012, 47-54
8 Pages Posted: 25 Nov 2012
Date Written: January 2, 2012
What should managers of corporations and of public policy do in response to current stock market prices and stock price changes? The answer to that question has important implications for corporate governance issues as well as for the intellectual foundation of public policy regarding merger and proxy regulations. It also requires an assessment of the normative value of certain precepts of finance theory. This paper reviews previous literature on this topic and provides evidence which suggests that while current stock prices and price changes indeed provide important signals for decision making by investors, their meaning for company managements, judges, and public policy makers may not be as compelling and depends on, among other factors, the nature of the company and of decisions being considered.
Keywords: Efficient market, agency theory, valuation
JEL Classification: D46
Suggested Citation: Suggested Citation