The article focuses on business combinations. Economist Baruch Lev commented on risk reduction as a motive for conglomerate mergers and the use of a game theoretic approach-proposed by economist Jan Mossin in the determination of exchange ratios for business combinations. In essence, Lev argued that conglomerate mergers may have no economic justification, the argument stems from the possibility that investors may be able to attain the risk and rate-of-return objectives of a proposed merger via the process of making adjustments in their personal portfolios. As a corollary, it was suggested that economically unjustifiable mergers may impose unnecessary transactions costs on the stockholders of the merging firms. Although these arguments have appeal, it should be noted that they appear to ignore some evidence on the efficiency of the capital markets. The efficient markets hypothesis states that market prices fully reflect available information which is implied by the statement that prices adjust instantaneously and unbiasedly to new information.