What are the reasons why disclosure by the SEC do not eliminate the information costs of adverse selection?
What will be an ideal response?
First, some good firms may be too young to have much information for potential investors to evaluate. Second, lemon firms will try to present the information in the best possible light so that investors will overvalue their securities. Third, there can be legitimate differences of opinion about how to report some items on income statements and balance sheets. Finally, the interpretation of whether information is material can be tricky.
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In the long run, constant returns to scale necessarily occur when the firm increases its production and the firm's
A) total cost increases. B) total cost does not change. C) average total cost increases . D) average total cost does not change. E) production increases by more than does the firm's total cost.
Last year, the nominal interest rate was less than the anticipated rate of inflation
A) This means that not enough loans were made by banks. B) This means that the real interest rate was negative. C) This means that the real interest rate was very high. D) This scenario is not possible.