A company was distributing 5$ of dividend per share till this year. The board decided to decrease
Question:
A company was distributing 5$ of dividend per share till this year. The board decided to decrease the dividend per share to 3.5$ for the current quarter only. This information is leaked to the public on 23rd of April but the official announcement is made on April 25th. Assume the tax on dividend is same as tax on capital gains and investors believe that the decrease in dividends is a good action taken by the company as it is a bad time in the economy and has nothing to do with earnings.
a-) What happens to the share price, increase, decrease or remain similar) under the following theories of dividend on announcement day? Assume ex-date is June 15th. What happened to share price on ex-date. How much the price will decrease or increase?
Managing Business Ethics Making Ethical Decisions
ISBN: 9781506388595
1st Edition
Authors: Alfred A. Marcus, Timothy J. Hargrave