- CFA Exams
- CFA Level I Exam
- Study Session 7. Corporate Finance (1)
- Reading 21. Analysis of Dividends and Share Repurchases
- Subject 1. Dividend policy and company value: theory
CFA Practice Question
Which of the following is incorrect?
A. At an average, academic studies show that dividend increases convey information about better future prospects for firms.
B. The Tax Preference Theory for dividends is based on the idea that investors prefer capital gains to dividends due to lower tax rates.
C. The Bird in Hand Theory of Gordon and Litner says that investors prefer the firm keep the profits rather than pay out cash dividends.
Explanation: The Bird in Hand Theory of Gordon and Litner says that investors prefer the firm pay out cash dividends rather than keep the profits.
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