In what way can managers use dividends to con-vey pertinent information about their firms in a world of informational asymmetry? Why would a manager choose to convey information via a dividend policy? Does empirical evidence support or refute the informational role of dividends?
Answer to relevant QuestionsWhy is it difficult for a firm with weaker cash flows to mimic a dividend increase undertaken by a firm with stronger cash flows? How do average dividend payout ratios for companies headquartered in English common- law countries compare with those of companies head-quartered in civil law countries? What explains this difference? How do the industrial patterns observed for dividend payouts compare to the patterns observed for capital structures? For example, are industries characterized by high dividend payouts also characterized by high leverage? Why do firms prepare cash budgets? How do (a) collection patterns and (b) payment patterns impact the cash budget? What are the key elements of a firms credit terms? What is a key determinant of the credit terms offered by a firm?
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