If investors do,in fact,prefer that firms retain most of their earnings,then firms that want to maximize stock price should hold dividend payments to low levels.

Question

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If investors prefer that firms retain most of their earnings, then holding dividend payments to low levels and using the money to reinvest in the firm's growth is likely to be viewed more favorably by investors. This is because reinvesting earnings generates the potential for future growth and increased profits, which can drive stock prices higher. Therefore, firms that want to maximize their stock price may be better off retaining earnings rather than paying out large dividends.

If Investors Do,in Fact,prefer That Firms Retain Most of Their