Most companies that adopt a target payout ratio policy modify their actual dividend payments because of the signaling effect.

Name: Most companies that adopt a target payout ratio policy modify their actual dividend payments because of the signaling effect.
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Question

Quizplus · Accepted Answer

Companies use their actual dividend payments to signal to investors their financial strength and future prospects. Therefore, they may modify their dividend payments to meet their target payout ratio and send a positive signal to investors.

Most Companies That Adopt a Target Payout Ratio Policy Modify