If investors do, in fact, prefer that firms retain most of their earnings, then firms that want to maximize stock price should hold dividend payments to low levels.
a. True
b. False

Question

Quizplus · Accepted Answer

If investors prefer that firms retain earnings, then holding dividend payments to low levels would signal to investors that the company is investing in future growth and potential, which can lead to higher stock prices.

If Investors Do, in Fact, Prefer That Firms Retain Most