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" theory suggests that investors prefer current dividends over future capital gains because of the time value of money. By receiving dividends now, investors can immediately reinvest that money and earn additional returns, rather than waiting for potential capital gains in the future.

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