In order to reduce agency costs,managers may decrease dividends,thus shifting the focus of investors to future capital gains that can only be attained by a well-run corporation.

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Agency costs are often reduced by increasing dividends, as this reduces the free cash flow available to managers, limiting their ability to invest in projects that do not maximize shareholder value. Increasing dividends can signal to investors that the company is performing well.

In Order to Reduce Agency Costs,managers May Decrease Dividends,thus Shifting