One possible reason that shareholders often insist on higher dividends is
A)they agree with Miller and Modigliani.
B)the capital gains tax disadvantage.
C)the stock market is efficient.
D)they do not trust managers to spend retained earnings wisely.

Question

Quizplus · Accepted Answer

Shareholders may not trust managers to spend retained earnings wisely and may therefore push for higher dividends to receive the cash directly. This is especially true if the shareholders believe that they can use the cash more effectively than the company can.

One Possible Reason That Shareholders Often Insist on Higher Dividends