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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Assume that a firm has a steady record of paying stable dividends for years. Market analysts had expected management to increase the dividend by 7.5% in the latest quarter. However, management announced a 15% increase in the current year’s dividend.
The market value of the stock rose 20% on the day of the announcement.
Which of the following would best explain the stock market’s reaction to the announcement?
a. Dividend Irrelevance theory
b. Expectations theory
c. Agency theory
d. Residual Dividend theory
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