Low dividends may increase stock value according to the
A) bird-in-the-hand theory.
B) information effect.
C) impact of agency costs.
D) tax bias in favor of capital gains.

Question

Quizplus · Accepted Answer

According to the tax bias in favor of capital gains, investors prefer to receive capital gains rather than dividends because capital gains are taxed at a lower rate than dividends. Therefore, small or low dividends may increase stock value as investors expect to receive better returns through capital gains.

Low Dividends May Increase Stock Value According to the