Because are seen as an implicit commitment, they send a signal of financial strength to shareholders.

Question

Quizplus · Accepted Answer

Dividends are viewed as a strong signal of financial strength, as they represent a direct and ongoing commitment to shareholders. Repurchases, on the other hand, can be seen as a weaker signal, as they are discretionary and can fluctuate depending on market conditions and the company's financial position.

Because Are Seen as an Implicit Commitment, They Send a Signal