In perfect financial markets, corporate financial policy is irrelevant.

Question

Quizplus · Accepted Answer

In perfect financial markets, all information is freely available and transactions are costless, resulting in a situation where every investor can construct an optimal portfolio of assets without regard to corporate financial policies. Therefore, corporate financial policy becomes irrelevant in such a scenario. However, perfect financial markets do not exist in reality, making corporate financial policy an important factor for achieving firm growth and profitability.

In Perfect Financial Markets, Corporate Financial Policy Is Irrelevant