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Finance Dictionary and Glossary of Investment Terms
Signaling approach
Definition 1.
tion 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.
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Definition 2.
The idea that insiders have information not available to the market. Moves made by insiders can signal information to outsiders and change the stock price.
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