Which of the following capital structure theories assumes that market information is symmetric?
A) Signaling theory
B) Contingent theory
C) Arbitrary theory
D) Budgeting theory
E) MM capital structure theory

Question

Quizplus · Accepted Answer

The MM capital structure theory assumes that market information is symmetric, meaning that all investors have the same information regarding the company's financial position and future prospects. This assumption allows MM to conclude that the capital structure of a company does not affect its overall value, as investors can replicate the same investment returns through their own financing choices, regardless of whether the company chooses to finance itself through debt or equity.

Which of the Following Capital Structure Theories Assumes That Market