Should MBA students study the Theory of Finance

AbstractStudents come to business schools to gain the skills necessary to be good general managers. This paper poses the question as to whether there is a benefit to such students to be taught theory—and in particular the theory of finance. After briefly reviewing the field of financial management, the concept of a theory is discussed. This is followed by some thoughts on why, in general, theories should be studied. The theory of risk and return is then presented as a conceptual framework for the study of finance, and it is shown how important this framework is for students of management. Some comments follow on the gap between theory and practice, and finally it is postulated that finance, when taught in a risk-return framework, may be considered to be the key subject on the MBA programme.