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signaling theory
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Signalling theory
Within evolutionary biology, signalling theory is a body of theoretical work examining communication between individuals. The central question is when organisms with conflicting interests should be expected to communicate "honestly". Mathematical models in which organisms signal their condition to other individuals as part of an evolutionarily stable strategy are the principal form of research in this field .
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signaling theory
a firm's announcement of issuing stocks is general a signal that the firm's prospects are not bright, further a signal that the firm's stock price will decline.
Note: if a firm's prospects would be brighter, which means its stock price would rise; the firm would not want to sell stocks for avoiding share the rising profits with other new stockholders. It could use debt to raise money. In the opposite, if a firm's prospects would be bad, which means its stock price would fall; the firm would want to sell new stocks for sharing future losses with other new stockholders.
Note: if a firm's prospects would be brighter, which means its stock price would rise; the firm would not want to sell stocks for avoiding share the rising profits with other new stockholders. It could use debt to raise money. In the opposite, if a firm's prospects would be bad, which means its stock price would fall; the firm would want to sell new stocks for sharing future losses with other new stockholders.
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