The static trade-off capital structure theory ignores
A) the effect of informational differences among shareholders, creditors, and management.
B) managers' own interests.
C) the risk aversion of the investors.
D) all of the above.
E) a and b

Question

Quizplus · Accepted Answer

The static trade-off capital structure theory ignores both the effect of informational differences among shareholders, creditors, and management and managers' own interests. It assumes a rational and risk-neutral management, which means it also ignores the risk aversion of the investors. Therefore, the correct answer is E, a and b.

The Static Trade-Off Capital Structure Theory Ignores