According to the signaling theory, which of the following is considered a signal from an investor's point of view?
A) A small company raising any required new capital by issue of new shares
B) A mature company raising any required new capital by issue of new shares
C) A small company maintaining a reserve borrowing capacity
D) A mature company maintaining a reserve borrowing capacity
E) A mature company raising any required new capital using debt beyond the normal target capital structure

Question

Quizplus · Accepted Answer

When a mature company raises new capital by issuing new shares, it can signal to investors that the company might be overvalued or that it lacks sufficient internal funds, which could be perceived negatively.

According to the Signaling Theory, Which of the Following Is