Shareholders may prefer dividends to reinvestment by the firm

Question

Quizplus · Accepted Answer

All of the other answers are correct. Shareholders may prefer dividends to reinvestment because dividends provide current income that resolves some uncertainty, such as concerns about the firm's future growth prospects. Dividend payments also have an information content that signals the firm's financial health and management's confidence in the company's future prospects. Additionally, some investors may prefer current cash to future cash, particularly when they have short-term financial needs or when they perceive that the return on their investment might be uncertain.

Shareholders May Prefer Dividends to Reinvestment by the Firm