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28 January, 21:28

If the information content, or signaling, hypothesis is correct, then a change in a firm's dividend policy can have an important effect on its stock price and cost of equity.

True or False?

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  1. 28 January, 21:30
    0
    True

    Explanation:

    The Stock price changes after dividend increase or decrease do not demostrate a prefference for Dividend over retained earnnings. Rather price changes simply indicates that dividend announcement have information, or signaling, content about future earnings.
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