The bird-in-the-hand argument espousing the importance of dividends or dividend relevance suggests that investors view a current (certain) dividend as less risky than future (uncertain) dividends or capital gains; this suggests that whether a firm pays a dividend or not can have a significant impact on share price.

Question

Quizplus · Accepted Answer

The bird-in-the-hand argument posits that investors prefer current dividends over future dividends or capital gains because current dividends are seen as less risky. This implies that the decision of a firm to pay or not to pay dividends can affect share prices. Therefore, option A is true.

The Bird-In-The-Hand Argument Espousing the Importance of Dividends or Dividend