The theory that investors regard dividend changes as signals of management's earnings forecasts is called the _____.

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The theory that investors react to dividend changes as signals of management's earnings forecasts is known as the information content hypothesis. This theory assumes that managers have more insider information regarding the company's future prospects than investors, and by altering the dividend payment, they deliver new details about the company's future earnings potential. The adjustment of the dividend payment communicates a message to investors about the future growth and operations of the corporation.

The Theory That Investors Regard Dividend Changes as Signals of Management's