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:

Behavioral Activation Therapy

A therapeutic approach that seeks to improve mood by increasing engagement in positively reinforcing activities.

Cognitive-Behavioral Therapy

A widely used therapy approach that focuses on changing negative thought patterns and behaviors to improve mental health.

Severe Depression

An emotional well-being issue defined by an ongoing feeling of sadness or a disinterest in usual pursuits, significantly hindering daily activities.

Antidepressant Medications

Drugs prescribed to relieve symptoms of depression by adjusting the levels of neurotransmitters in the brain.