Question: In practice, there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue. Which of the

In practice, there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue. Which of the following is a likely explanation of this phenomenon?

A) Companies tend to increase their total dividend payout following a bonus issue.

B) Bonus issues create wealth for shareholders.

C) Bonus issues reduce the debt/equity ratio and, therefore, the riskiness of the firm.

D) Bonus issues increase the dividend payout ratio of companies.

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