Which of the following statements about dividend is NOT true? Bird-in-the-hand theory says that investors think dividends are less risky than potential future capital gains, so they like dividends. Tax preference theory indicates that low dividend payments mean higher capital gains. Capital gains taxes are lower than dividend taxes, and they can be deferred. So investors prefer low-dividend-payments or non-dividend-payments firms. Based on the Bird-in-the-hand theory, a firm should set low dividend payout ratio to increase firm value. Based on the Tax preference theory, a firm should pay less dividends to increase firm value.
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