- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 18. Analysis of Dividends and Share Repurchases
- Subject 2. Dividend Policy and Company Value: Theory
CFA Practice Question
The "bird-in-the-hand" theory of dividends would suggest that investors
B. prefer that firms retain and reinvest earnings.
C. are indifferent between dividend payment and earnings retention.
A. prefer that firms pay dividends.
B. prefer that firms retain and reinvest earnings.
C. are indifferent between dividend payment and earnings retention.
Correct Answer: A
According to the "bird-in-the-hand" theory of dividends, investors would prefer that earnings be paid out as dividends today.
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