When a firm pays out a dividend, the share price ________, and when it conducts a share repurchase at the market price, the share price ________.
A) increases, increases
B) is unchanged, decreases
C) decreases, decreases
D) decreases, is unchanged

Question

Quizplus · Accepted Answer

When a firm pays out a dividend, the share price typically decreases by approximately the amount of the dividend, reflecting the reduction in the company's assets. When a firm conducts a share repurchase at the market price, the share price is generally unchanged in the immediate term, as the transaction is conducted at the current market price and reflects a neutral signal to the market.

When a Firm Pays Out a Dividend, the Share Price