Which of the following is not an argument for the relevance of dividends?
A) Existence of issuance costs
B) Reduction of agency costs
C) Protection against dilution
D) Risk aversion

Question

Quizplus · Accepted Answer

Protection against dilution is not an argument for the relevance of dividends. Dilution concerns relate to the impact on existing shareholders' ownership percentages when new shares are issued, which is a separate issue from the reasons dividends might be valued or relevant to shareholders. Arguments for the relevance of dividends often include reducing agency costs (by limiting the funds available for potentially wasteful spending by management) and appealing to investors' preferences, such as those with a desire for stable income or those in environments with issuance costs or tax advantages for dividends.

Which of the Following Is Not an Argument for the Relevance