The informational content of dividends refers to
A) nonpayment of dividends by corporations.
B) a dividend paid as a percent of current earnings.
C) dividend changes as indicators of a firm's future.
D) a stable and continuous dividend.

Question

Quizplus · Accepted Answer

The informational content of dividends refers to the signals that dividend changes provide about a firm's future prospects. If a firm increases its dividend, investors may interpret this as a positive signal about the firm's earnings potential and growth prospects. Similarly, if a firm decreases its dividend, investors may interpret this as a negative signal about the firm's future performance. Therefore, the informational content of dividends is related to dividend changes, rather than the absence or stability of dividends.

The Informational Content of Dividends Refers to