Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest thatpositive effects of dividend increases are attributable
A) directly to the optimal capital structure.
B) not to the informational content but to the consistency in the payment of dividends.
C) directly to the dividend policy.
D) not to the dividend itself but to the informational content of the dividends with respect to future earnings.

Question

Quizplus · Accepted Answer

Modigliani and Miller suggest that the positive effects of dividend increases are due to the informational content of the dividends, which signal management's confidence in future earnings, rather than the dividends themselves.

Modigliani and Miller, Recognizing That Dividends Do Somehow Affect Stock