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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When you duplicate yourself through other people your security is not dependent on your ability to perform.
A. True B. False
If the share of population employed in two countries is the same, average living standards will be higher in the country with:
A. higher average labor productivity. B. lower average labor productivity. C. the larger population. D. the smaller population.
The value of the next-best choice not chosen is called opportunity cost.
a. true b. false
If the FDIC eliminated its insurance program for deposits, then
A. banks would probably hold fewer reserves. B. individual depositors would have more incentive to ascertain the soundness and solvency of the bank. C. moral hazard would be increased. D. the banking system would probably fail.