Which of the following might cause dividend policy to affect shareholder wealth?
A) Taxes
B) Transaction costs
C) Changes in the firm's investment policies
D) All of the above

Question

Quizplus · Accepted Answer

A) Taxes: Dividend payments are taxed differently than capital gains, so a company's dividend policy may affect the amount of taxes shareholders have to pay, which in turn can affect shareholder wealth.
B) Transaction costs: When a company pays dividends, shareholders may have to pay transaction costs to purchase additional shares if they wish to maintain their ownership percentage. This can reduce shareholder wealth.
C) Changes in the firm's investment policies: If a company changes its investment policies, it may affect its ability to pay dividends in the future, which can in turn affect shareholder wealth.

Which of the Following Might Cause Dividend Policy to Affect