If managers commit themselves to paying out cash in excess of investment needs as dividends rather than retaining it within the company,shareholders' wealth may increase because:
A)it indicates that management will not waste resources.
B)shareholders prefer dividends now rather than in the future.
C)it reflects badly on future investments.
D)it reflects positively on future investments.

Question

Quizplus · Accepted Answer

Paying out excess cash as dividends signals to shareholders that management is disciplined and will not waste resources on unprofitable investments, potentially increasing shareholders' wealth.

If Managers Commit Themselves to Paying Out Cash in Excess