To say that there is "asymmetric information" in the issuing of common stock or debt means that:
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A. B. C. D.D
Asymmetric information occurs when one party has more information than the other party in a transaction. In the context of issuing common stock or debt, asymmetric information means that one party (either investors or management) has more accurate information about the financial performance and future prospects of the issuing company than the other party.
Option D, "Management has more accurate information than investors have", is the correct answer. This is because the management of the issuing company has access to private information that is not available to the general public or even to the company's investors. For example, management may have more detailed knowledge about the company's financial statements, operational efficiency, and future plans.
This information asymmetry can lead to a situation where investors may not be fully informed about the true value of the stock or debt they are purchasing. This can result in the mispricing of securities, where the securities are either overvalued or undervalued, depending on whether the investors or management have better information.
To mitigate this information asymmetry, companies are required to disclose certain information to the public and potential investors. This can include financial statements, management discussion and analysis, and other information that is relevant to the company's financial health and future prospects. By making this information publicly available, companies can increase the transparency of the market and reduce the impact of information asymmetry on the pricing of securities.