Suppose a firm announces a new dividend amount every year with the first quarterly dividend declaration, but never explicitly states that the dividend will be continued for the other three quarters of the year However, in the past the firm has always continued the first quarters dividend into the o...

As investors begin to believe that this tendency to s ...

Suppose a firm announces a new dividend amount every year with the first quarterly dividend declaration, but

Question:

Suppose a firm announces a new amount every year with the first quarterly declaration, but never explicitly states that the will be continued for the other three quarters of the year. However, in the past the firm has always continued the first quarter’s into the other three quarters of the year. How much would you expect this firm’s share price to react when it announced the new, first-quarter at the beginning of a new year?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...