In practice,firms tend to increase their dividend

Question

Quizplus · Accepted Answer

Firms tend to increase their dividend only when they believe they can sustain the increased payout indefinitely. This is because investors often perceive dividend cuts or suspensions as negative signals about future prospects, leading to a lower stock price. Therefore, firms typically avoid increasing dividends unless they are confident in their ability to continue paying them at the higher rate. Options A, B, and D are not necessarily reasons why firms increase their dividend.

In Practice,firms Tend to Increase Their Dividend