According to the catering theory, firms cater to the preferences of ________.

Question

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The catering theory posits that firms cater to the preferences of investors in order to maintain their stock prices and avoid costly actions such as bankruptcy. This is done through actions such as dividend payments, stock buybacks, and other forms of shareholder-friendly policies. The theory suggests that firms prioritize the desires of their investors over those of other stakeholders, such as creditors or managers, in order to keep their stock prices high and attract more investment.

According to the Catering Theory, Firms Cater to the Preferences