According to the Signaling Theory of Capital Structure,firms First Use

question 29

True/False

According to the signaling theory of capital structure,firms first use common equity for their capital,then use debt if and only if they can raise no more equity on "reasonable" terms.This occurs because the use of debt financing signals to investors that the firm's managers think that the future does not look good.

---

Definitions:

Psychodynamic Theorists

Scholars and clinicians who focus on the psychological forces underlying human behavior, feelings, and emotions, and how they may relate to early experience.

Defense Mechanisms

Psychological strategies employed by individuals unconsciously to cope with reality and maintain self-image by reducing anxiety arising from unacceptable thoughts or feelings.

Free Associations

A psychoanalytic technique where patients express their thoughts freely, allowing therapists to uncover unconscious desires or feelings.

Projections

The action of predicting or estimating something based on current trends or data.