According to the signaling theory, what is symmetric information?
A) The situation in which investors and managers have identical information about the firm's prospects
B) The situation in which employees and managers have identical information about the firm's prospects
C) The situation in which investors and creditors have identical information about the firm's prospects
D) The situation in which managers have different (better) information about their firm's prospects than outside investors
E) The situation in which employees have different (better) information about their firm's prospects than managers

Question

Quizplus · Accepted Answer

Symmetric information refers to the situation in which investors and managers have identical information about the firm's prospects, meaning that they both have access to the same information and can make decisions based on the same knowledge. This is considered ideal for efficient markets, as both parties can make rational decisions based on equal knowledge.

According to the Signaling Theory, What Is Symmetric Information