Which of the Following Statements Is FALSE

question 42

Multiple Choice

Which of the following statements is FALSE?

• A)Firms adjust dividends relatively infrequently,and dividends are much less volatile than earnings.This practice of maintaining relatively constant dividends is called dividend signaling.
• B)When a firm increases its dividend,it sends a positive signal to investors that management expects to be able to afford the higher dividend for the foreseeable future.
• C)The average size of the stock price reaction increases with the magnitude of the dividend change,and is larger for dividend cuts.
• D)When managers cut the dividend,it may signal that they have given up hope that earnings will rebound in the near term and need to reduce the dividend to save cash.