Final answer:
The statement 'Dividends to shareholders are tax-deductible' is false. Dividends are paid from a corporation's after-tax profits and are not deductible expenses for the company. Shareholders may have to pay taxes on any dividends they receive.
Step-by-step explanation:
The statement given, 'Dividends to shareholders are tax-deductible,' is not true. In the context of corporate finance, dividends are a form of earnings distribution from a corporation to its shareholders. Unlike expenses that a company might incur in its operational activities, dividends are not considered tax-deductible expenses. Instead, dividends are paid out from the company's after-tax profits. Shareholders then may be required to pay taxes on the dividends they receive, depending on the tax laws of their country.
When considering the decision-making process of a firm, executive management, overseen by a board of directors, is responsible for deciding when to issue stock, when to pay dividends, and when to reinvest profits back into the company. This holds true for both private and public corporations. These decisions are essential components of the firm's financial strategies and overall corporate governance.