If the information content, or signaling, hypothesis is correct, then changes in dividend policy can be important with respect to firm value and capital costs.

Question

Quizplus · Accepted Answer

The information content hypothesis suggests that changes in dividend policy signal important information to investors about the firm's future prospects, which can impact firm value and capital costs. Therefore, changes in dividend policy can be significant for a firm.

If the Information Content, or Signaling, Hypothesis Is Correct, Then