The dividend policy model that assumes that managers use dividends to covey positive information to shareholders is called the ...

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The signaling model suggests that managers use dividends as a signal to communicate positive information about the company's financial health and future prospects to shareholders. This model assumes that investors view dividend payments as an indication of a firm's financial health, and that managers will only pay dividends if they believe the company is financially stable and has positive growth prospects. The agency cost model focuses on the conflict of interest between managers and shareholders, while the contracting cost model suggests that dividends are used to reduce the costs associated with monitoring managerial behavior.

The Dividend Policy Model That Assumes That Managers Use Dividends