The market's reaction to the announcement of a change in the firm's dividend payout is likely the:

Question

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The market's reaction to a change in the firm's dividend payout is likely due to the information content effect. This means that the market perceives the change in dividend as new information about the firm's future prospects and adjusts its expectations about the firm's value accordingly. The clientele effect refers to how a change in dividend policy affects the investor base, while MM Propositions I and II relate to capital structure and cost of capital. The efficient markets hypothesis assumes that asset prices reflect all available information.

The Market's Reaction to the Announcement of a Change in the Firm's