Signaling model vs Pecking-Order model
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How does the signaling model of financial structure differ from the pecking-order model with respect to the assumption in this hypothesis of asymmetric information?
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In Signaling theory, MM assumed that investors and managers have the same information. But, managers often have better information. Thus, they would:- Sell stock if stock is overvalued.- Sell bonds if stock is undervalued. Investors ...
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