The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares is called (a):

Question

Quizplus · Accepted Answer

The ability of shareholders to create their own personal dividend policy by reinvesting dividends or selling shares is known as homemade dividend policy. This concept is rooted in the idea that investors have different preferences when it comes to receiving dividends or capital gains. Therefore, they can create their own personalized dividend policy by selling shares if they need cash or reinvesting dividends if they prefer capital gains. This is a way for shareholders to undo the dividend policy of the firm if they disagree with it. Therefore, the correct answer is E.

The Ability of Shareholders to Undo the Dividend Policy of the Firm