undefined

External funds are not a perfect substitute for internal funds because of Select one: a. Asymmetric Information O b. Agency Costs O c Transaction Costs O d. Financial Distress Costs O e. All of the above Firms have a monopoly over the supply of equity.So, a rational value maximizing manager of a financially constrained firm should issue new equity to finance investment opportunities. Select one True False One conclusion drawn by Fazzari Hubbard and Petersen is that firm heterogeneity plays an important role in determining the impact of imperfect capital markets of investments. What type of heterogeneity is FHP referring to? Select one: a. Differences in firms' access to external finance O b. Differences across manufacturing Industry categories c. Differences in firms retention of cash flow O d. All of the above Fazzari, Hubbard and Petersen find that cash flow significantly explains investment rates for even the mature, high dividend paying, financially unconstrained firms. These firms, like every other form in the economy, pay a premium to get external finance. The logical decision for these firms would be to cut dividends and use this income to finance new Investment. This policy would be particularly effective during recessions when firms face cash crunch. What stops these firms from doing so? Select the most likely explanation based on the empirical evidence from FHP. Select one O a. To avoid agency cost problems arising from unproductive investments. O b. This is an erroneous finding arising from measurement errors in Q. C. Cutting dividends would send a bad signal to the market. O d. Asymmetric information problems inherent in capital markets