The fact that firms continue to issue dividends despite their tax disadvantage is often referred to as the ________.
A) issuance puzzle
B) dividend puzzle
C) payback puzzle
D) policy puzzle

Question

Quizplus · Accepted Answer

The term used to describe the phenomenon of firms issuing dividends despite their tax disadvantage is the "dividend puzzle." This is because traditional finance theory suggests that firms should repurchase shares instead of paying dividends in order to avoid the double taxation of dividends. However, many firms still choose to issue dividends, and researchers are still trying to determine the reasons behind this. Choices A, C, and D are not commonly used terms to describe this phenomenon.

The Fact That Firms Continue to Issue Dividends Despite Their