Signaling approach

Definition:

Notion that insiders in a firm have information that the market does not have, and that 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.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Italian Derivatives Market (IDEM)

A derivatives market operated by the Italian Stock Exchange Council. It trades futures and options on the 30 index and individual stock options. See: Italian Stock Exchange.

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