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Signaling approach

• Approach to the determination of the optimal capital structure asserting that insiders in a firm have information that the market does not have; therefore, the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.

 
 Embedded terms in definition
 Asymmetric information
Capital structure
Capital
Change
Firm
Insiders
Market
Optimal capital structure
Signal
 
 Related Terms
 

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Am I not destroying my enemies when I make friends of them? - Abraham Lincoln (1809-1865)

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