Question

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?

Answer 1

True

Step-by-step 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.