Advanced search

The Business Judgement Rule vs. the Efficient Market Hypothesis

Donald G. Margotta (Associate Professor of Finance, College of Business Administration, Northeastern University, Boston, MA 02115)

Managerial Finance

ISSN: 0307-4358

Publication date: 1 May 1995

Abstract

Contests for corporate control often create a conflict between a legal principle, the business judgment rule (BJR), and an economics principle, the efficient market hypothesis (EMH). The BJR focuses on the process of decision making and requires managers to be guided by their integrity and diligence. The EMH focuses on outcomes and expects decisions to be guided by stock prices. Ideally the principles do not conflict, but when they do, when the market disagrees with managers' decisions, it is important to understand why. This article discusses the principles, why they sometimes conflict, and circumstances when one should outweigh the other.

Citation

Margotta, D.G. (1995), "The Business Judgement Rule vs. the Efficient Market Hypothesis", Managerial Finance, Vol. 21 No. 5, pp. 5-17. https://doi.org/10.1108/eb018515

Download as .RIS

Publisher

:

MCB UP Ltd

Copyright © 1995, MCB UP Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
Rent from Deepdyve
If you think you should have access to this content, click the button to contact our support team.
Contact us
Manage cookies

We’re listening — tell us what you think

Join us on our journey