1. In the period from 1977 we have largely witnessed a period of disappearing dividends. Research by Baker and Wurgler (2004) argues that the disappearing dividends are caused by firms catering to changes in investor sentiment for dividends. Briefly explain their reasoning.
2. Explain why managers are in a better position to exploit stock market inefficiencies than other investors.
3. Discuss the market timing theory with respect to managers’ decisions to issue new equity or new debt or proceed to stock repurchases.
4. Explain the Market timing theory in a mergers and acquisitions framework.