This chapter discusses the idea that the stock market is informationally efficient and that this leads to allocative efficiency is probably an old one. The weak form states that as all new information about the company is immediately and fully reflected in and by a new price movement. The semi-strong form states that share prices adjust immediately and once and for all to new information as it becomes publicly available. The chapter examines the share price reactions of bidding firms at the time of a merger announcement. The US evidence also suggests that the relationship between market prices and reported profits or earnings is complex. The share price adjustment was quick and, according to Firth, 'there would appear to be no profitable mechanical investment strategies which can be based on earnings announcements'. Auditors also contribute to efficiency by providing investors with an independent assurance that the company's financial statements are true and fair.