If the information content,or signalling,hypothesis is correct,then changes in dividend policy can have an important effect on the firm's value and capital costs.

Question

Quizplus · Accepted Answer

The information content or signaling hypothesis suggests that changes in dividend policy can signal important information to investors about a firm's prospects and future earnings potential. Thus, changes in dividend policy can affect investor perceptions of the firm's value, which can in turn impact the firm's capital costs. Therefore, this statement is true.

If the Information Content,or Signalling,hypothesis Is Correct,then Changes in Dividend