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problem:  Suppose that a firm has a regular record of paying high dividends for years. A new management team decided to cut the current year's dividend in half without disclosing the reason. The market price of the stock fell 35 percent on the day the dividend cut was announced. Which of the following would best describe the stock market's reaction to the announcement?

[A] Empirical theory

[B] Dividend Irrelevance theory

[C] Residual Dividend theory

[D] Information effect

Basic Finance, Finance

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