Question: Issuing equity can be perceived as a negative signal because at the time of equity issue: The firm is letting go of cheaper debt. The

Issuing equity can be perceived as a negative signal because at the time of equity issue:

  • The firm is letting go of cheaper debt.
  • The firm is growing too fast.
  • Mangers will use equity to pay back debt.
  • Investors think that managers consider equity as over or maximally priced.
  • Investors think that managers consider equity as under priced.

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