Given a compromise dividend policy, ﬁrms prefer selling new equity as frequently as possible.

Name: Given a compromise dividend policy, ﬁrms prefer selling new equity as frequently as possible.
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Question

Quizplus · Accepted Answer

A compromise dividend policy means that the firm balances between paying dividends and retaining earnings for future growth. Selling new equity would dilute the ownership of current shareholders, and therefore, firms would prefer to avoid selling new equity as frequently as possible.

Given a Compromise Dividend Policy, ﬁRms Prefer Selling New Equity