The "Bird-In-The-Hand" Dividend Theory Suggests That

Multiple Choice

The "bird-in-the-hand" dividend theory suggests that

A) high dividends increase stock value because shareholders believe they can earn a higher return than the company.
B) high dividends increase stock value because shareholders are more certain of the dividend yield than of potential future capital gains.
C) high dividends increase stock value because capital markets are inefficient and dividends are the only sure way to get money from an equity investment.
D) high dividends decrease stock value because dividend payments take money out of the corporate "nest" and reduce the ability of the corporation to function effectively.