Question: How should (a) Signaling and (b) The clientele effect be taken into account by a firm as it considers its dividend decision? Do signaling and

How should
(a) Signaling and
(b) The be taken into account by a firm as it considers its decision? Do signaling and clientele effects make it easier or harder to determine if investors prefer high or low payout ratios? Do these factors influence the desirability of a stable policy versus one that is flexible and thus varies with the company’s cash flows and investment opportunities?

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Historically companies have been reluctant to cut their dividendsthey dont cut dividends unless things really look horrible to management Moreover investors know about managements reluctance to cut di... View full answer

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