The Signaling Effect Theory of Dividend Policy Suggests That

The signaling effect theory of dividend policy suggests that

A) management will increase dividends to signal "good times" even if they believe the dividend level is not sustainable.
B) an increase in the dividend payout ratio signals that management has acquired a major ownership interest in the firm.
C) management will be reluctant to cut dividends if the firm is expecting what they believe are temporary financial difficulties.
D) Both A and B are true.