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problem: Suppose that a firm has a steady record of paying stable dividends for years. Market analysts had expected management to increase the dividend by 7.5 percent in the latest quarter. However, management announced a 15% rise in the current year's dividend. The market price of the stock rose 20 percent on the day of the announcement. Which of the following would best describe the stock market's reaction to the announcement?

[A] Residual Dividend theory

[B] Agency theory

[C] Expectations theory

[D] Dividend Irrelevance theory

Basic Finance, Finance

  • Category:- Basic Finance
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