Some companies have been known for paying dividends to current stockholders while simultaneously raising capital through a new equity issue. Generally, this behavior is explained by the need to discipline managers by regularly exposing the company to the extra scrutiny involved in an equity issue.

Question

Quizplus · Accepted Answer

This is true. By issuing new equity and raising capital while still paying dividends, a company is demonstrating to its shareholders that it is committed to growing the business and generating value for its investors. This can help to prevent management from becoming complacent or engaging in behaviors that might be detrimental to the company's long-term success. Additionally, an equity issue can attract new investors and increase liquidity in the stock, which can be beneficial for everyone involved.

Some Companies Have Been Known for Paying Dividends to Current