The Modigliani and Miller (MM)articles Implicitly Assumed,among Other Things,that Outside

question 67

True/False

The Modigliani and Miller (MM)articles implicitly assumed,among other things,that outside stockholders have the same information about a firm's future prospects as its managers.That was called "symmetric information," and it is questionable.The introduction of "asymmetric information" led to the development of the "signaling" theory of capital structure,which postulated that firms are reluctant to issue new stock because investors will interpret such an act as a signal that the firm's managers are worried about its future.Other actions give off different signals,and the end result is that capital structure is affected by managers' perceptions about how their financing decisions will affect investors' views of the firm and thus its value.

---

Definitions:

Numbers

Refers to the numerical data or statistics that are used to support arguments, make calculations, or present findings.

Figures

Numerical data or statistics, often presented in tables, charts, or graphs.

Subject-Verb Agreement

The grammatical rule that requires the verb in a sentence to match the subject in number (singular or plural).

Assistants

Individuals who provide support or aid to others, often in a work-related or professional context, facilitating various tasks or activities.