Three parts to the question:
1a. When the stock prices changes around the declaration date indicate that important information is contained in its dividend announcements. This would validate the ______________ hypothesis
a. dividend irrelevance
b. bird in hand
c. information content
d. clientele
e. residual dividend policy
1b. Catering theory (or clientel effect)
a. is when firms cater to the preference of its investors
b. is when a firm contracts out for food service for its annual meeting
c. is when a firm refuses to pay a dividend
d. is when a firm pays out "all" of its earnings in dividends
1c. Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?
a. Its earnings become more stable
b. Its access to the capital markets increases
c. Its R&D efforts pay off, and it now has more high-return investment opportunities
d. Its accounts receivable decrease due to a change in its credit policy
e. Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages