Which one of the following statements is correct?
A)Firms prefer to cut dividend payments rather than borrow money to fund a short-term cash need.
B)Share repurchases tend to increase agency costs.
C)Maintaining a steady dividend is a key goal of most dividend-paying firms.
D)Tax rates are the key factor in determining a firm's dividend policy.
E)Stock prices tend to ignore expected changes in dividend payments.

Question

Quizplus · Accepted Answer

Maintaining a steady dividend is a key goal of most dividend-paying firms. This is because investors prefer certainty and stability in dividend payments, and steady dividends can also signal financial strength and a commitment to shareholder value. The other statements are not entirely accurate. Firm's may choose to borrow instead of cutting dividends, share repurchases may or may not increase agency costs depending on the circumstances, tax rates are just one of many factors that influence dividend policy, and stock prices do react to expected changes in dividend payments.

Which One of the Following Statements Is Correct