If transaction costs are significant,then which of the following might be the effect on cash dividends and share repurchases?

Question

Quizplus · Accepted Answer

When transaction costs are significant, the firm may prefer to pay dividends to shareholders rather than engage in share repurchases, as the latter involves higher transaction costs. This preference may be driven by the desire to reduce the costs associated with buying back shares in the market, which can be substantial. Therefore, the investors' preference argument (i.e., the argument that investors prefer dividends to share repurchases) may become more relevant in this context, leading to a greater likelihood of cash dividends being paid.

If Transaction Costs Are Significant,then Which of the Following Might