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Issuing equity can be perceived as a negative signal because at the time of equity issue: The firm is letting go of cheaper debt. The
Issuing equity can be perceived as a negative signal because at the time of equity issue:
- The firm is letting go of cheaper debt.
- The firm is growing too fast.
- Mangers will use equity to pay back debt.
- Investors think that managers consider equity as over or maximally priced.
- Investors think that managers consider equity as under priced.
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