It is January 2, 2016. Farah Jennings has worked for several years at UMB Manufacturing Company. Yesterday, the CEO informed Jennings that he would be retiring, effective immediately, and the Board of Directors has appointed Jennings the new CEO. After a brief celebration, she arrives work today ready to accept her responsibilities. Jennings is immediately confronted with a number of investment and corporate finance decisions.
Jennings suggests to the board of directors an increase in its dividend by knowing the poor future prospect of her company.She explains to the board that investors may then believe that the company has positive future prospects, leading to an increase in stock price and shareholder wealth. Briefly justify whether such imitation is likely to achieve the CEO's objective over long term.