It Has Been Argued That Investors Prefer High-Payout Companies Because

question 13

True/False

It has been argued that investors prefer high-payout companies because dividends are more certain (less risky)than the capital gains that are supposed to come from retained earnings.However,Miller and Modigliani say that this argument is incorrect,and they call it the "bird-in-the-hand fallacy." MM base their argument on the belief that most dividends are reinvested in stocks,hence are exposed to the same risks as reinvested earnings.

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Definitions:

Political Identity

The aspect of an individual's identity that relates to their political beliefs, party affiliation, or ideology, shaping their perspectives and participation in political processes.

Nullification Crisis

A United States political crisis in the early 1830s involving a confrontation between South Carolina and the federal government over the state's attempt to nullify a federal law.

Compromise Tariff

refers to the Tariff of 1833, which was enacted to resolve the Nullification Crisis between the federal government and South Carolina by gradually reducing import duties.

Dorr War

A short-lived armed insurrection in the U.S. during the early 1840s, led by Thomas Wilson Dorr, advocating for broader voting rights in Rhode Island.