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:

Conflict Theory

A perspective in sociology that emphasizes the social, political, or material inequality of a social group, critiquing the broad socio-political system.

Structural Functionalism

A theory in sociology that considers society to be a sophisticated system where various components interact to foster cohesion and order, emphasizing the roles and purposes of social structures.

Dysfunction

In sociology, refers to any social pattern that disrupts the operation of society, leading to conflict and decreased stability.

Social Structure

The complex framework of societal institutions, social relations, and norms that shape the behavior and interactions of individuals within a society.