Which of the Following Statements Is False

question 28

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 so need to reduce the dividend to save cash.

---

Definitions:

Fight-or-Flight Response

A physiological reaction that occurs in response to a perceived harmful event, attack, or threat to survival, initiating the body's acute stress response.

Tend-and-Befriend Response

A behavior in response to stress involving seeking social affiliation and nurturing activities, more commonly observed in females.

Stressor

A situation, event, or stimulus that causes stress, potentially triggering a physical or psychological response.

Organism

an individual living entity that can grow, reproduce, respond to stimuli, and maintain homeostasis.