- 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
Payment of dividends can help reduce the agency conflicts between:
B. managers and debtholders.
C. shareholders and debtholders.
A. managers and shareholders.
B. managers and debtholders.
C. shareholders and debtholders.
Correct Answer: A
Managers have a strong preference against dividends payments since paying dividends reduces cash subject to managerial discretion. However, payment of dividends can worsen conflicts of interest between shareholders and debtholders.
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