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Describe the assumptions, implications and predictions of the pecking order theory. Explain why asymmetric information frictions can lead to underinvestment. Based on the pecking order
Describe the assumptions, implications and predictions of the pecking order theory. Explain why asymmetric information frictions can lead to underinvestment. Based on the pecking order theory and its implications, what is the relationship between a firms financial slack and the likelihood that the firm underinvests? Also, is the probability of underinvestment in a particular project affected by the expected value of the project?
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