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IgorLugansk [536]
3 years ago
6

Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock p

rice. The theory of explains this phenomenon.
Business
1 answer:
alina1380 [7]3 years ago
7 0

Answer:

The theory which explains the phenomenon described in the question is referred to as "Dividend Signaling".

Explanation:

When a company announces that is will be paying dividends, stock market players percieve this as an indication of :

  1. Strenght
  2. Performance and
  3. Profitability.

Hence investors will find it more attractive to purchase such a stock.

Cheers!

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