One Implication of Information Asymmetry Between Investors and Firm Managers

question 75

True/False

One implication of information asymmetry between investors and firm managers is that if a firm raises new capital by issuing debt rather than by selling shares, it signals that the firm has very good prospects.

---

Definitions:

Interactive Computer Services

Platforms and providers offering online services that enable users to interact with each other and access content, such as social media or forums.

Malicious Prosecution

A tort in which one person wrongfully subjects another to criminal or civil litigation for the sole purpose of causing problems for that other person, often in retaliation for previous litigation between the two.

Wrongful Civil Proceedings

Wrongful civil proceedings involve initiating legal action against someone without proper grounds or with an improper motive, potentially leading to a claim for abuse of the legal process.

Abuse of Process

Abuse of process refers to the misuse of legal procedures for malicious purposes or to harm another, rather than to achieve a legitimate legal outcome.