Which of the following supports the "bird-in-the-hand" dividend theory?
A) Investors prefer dividends to capital gains because of the time value of money.
B) Increasing a firm's dividends transfers risk and ownership from the current shareholders to new owners.
C) Investment decisions are not influenced by dividend policy.
D) Capital mix decisions are not influenced by dividend policy.

Question

Quizplus · Accepted Answer

The "bird-in-the-hand" dividend theory suggests that investors prefer current dividends over potential future capital gains because of the time value of money. Choice A directly supports this theory.

Which of the Following Supports the "Bird-In-The-Hand" Dividend Theory