A firm's dividend policy does not affect the firm's value.

Question

Quizplus · Accepted Answer

A firm's dividend policy can affect its value as it can have an impact on investor perception and the stock price. For example, a firm that consistently pays high dividends may attract more investors looking for income and thus increase demand for the stock, leading to a higher stock price. On the other hand, a firm that does not pay dividends may be seen as having more opportunities for growth and may attract investors looking for capital appreciation, leading to a higher stock price as well. However, it is worth noting that dividend policy is just one of many factors that can impact a firm's value.

A Firm's Dividend Policy Does Not Affect the Firm's Value