The Asymmetric Information Explanation of Capital Structure Suggests That Firms

question 160

True/False

The asymmetric information explanation of capital structure suggests that firms will issue new equity only when the managers believe the firm's stock is overvalued; as a result, issuing new equity is considered a negative signal that will result in a decline in share price.

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Definitions:

Official Measure

A standardized method or tool adopted by authorities for assessing, regulating, or comparing data within a specific field.

Poverty

A condition where individuals or communities lack the financial resources to meet basic living necessities such as food, shelter, and healthcare.

Person-Centered Approach

A psychological approach developed by Carl Rogers that emphasizes the importance of the individual's personal experience and the belief in the innate tendency toward growth and development.

Therapist

A professional trained to provide psychological guidance and support to individuals dealing with emotional, mental, or physical issues.