Which One of the Following Statements Describes the Finding from Academic

question 26

Multiple Choice

Which one of the following statements describes the finding from academic studies on corporate dividend policy?

• A) Managers tend to increase regular cash dividends in response to unexpectedly high earnings.
• B) Managers tend to maintain a level dividend payment at an amount that they are relatively certain they can maintain in the future.
• C) Managers tend to focus on dividends rather than stock repurchases because institutional investors tend to prefer regular dividends.
• D) Dividend policy doesn't matter because investors can re-create dividends by selling a fraction of their shares.

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Definitions:

Zero Economic Profit

A situation in which a firm's total revenues equal its total costs, earning a normal profit but no economic profit.

Perfectly Competitive

A market structure characterized by many sellers, homogeneous products, and free entry and exit, leading to price determination by supply and demand.

Long-Run Industry Supply Curve

The long-run industry supply curve shows how the quantity supplied by an industry varies with price once all adjustment has been made, including the entry and exit of firms.

Increasing-Cost Industry

An industry in which production costs rise as firms enter the market, often leading to higher prices for consumers.