8291 and the results of a similar survey of the 500

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Unformatted text preview: rted in Linda C. Hittle, Kamal Haddad, and Lawrence J. Gitman, “Over-the-Counter Firms, Asymmetric Information, and Financing Preferences,” Review of Financial Economics (Fall 1992), pp. 81–92. 13. Stewart C. Myers, “The Capital Structure Puzzle,” Journal of Finance (July 1984), pp. 575–592. CHAPTER 11 signal A financing action by management that is believed to reflect its view of the firm’s stock value; generally, debt financing is viewed as a positive signal that management believes the stock is “undervalued,” and a stock issue is viewed as a negative signal that management believes the stock is “overvalued.” Leverage and Capital Structure 441 viewed as a signal that reflects management’s view of the firm’s stock value. Debt financing is a positive signal suggesting that management believes that the stock is “undervalued” and therefore a bargain. When the firm’s positive future outlook becomes known to the market, the increased value will be fully captured by existing owners, rather than having to be shared with new stockholders. If, however, the outlook for the fir...
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This document was uploaded on 03/30/2014.

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