The "bird-in-the-hand dividend theory" supports which view of the effect of dividend policy on company value?
A) A firm's dividend policy is irrelevant.
B) High dividends increase stock values.
C) Low dividends increase stock values.
D) Constant dividends increase stock values.

Question

Quizplus · Accepted Answer

The "bird-in-the-hand dividend theory" suggests that investors prefer to receive current dividends rather than relying on potential future dividends or capital gains. Therefore, companies that offer high dividends are perceived to be less risky, and this can increase the stock price. This view contrasts with option pricing theory, which suggests that a firm's dividend policy is irrelevant to its value.

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