Explain these rationales for why u.s. firms are distributing

Reference no: EM133325679

Question: One of the key problems that management of a corporation faces is how to compensate shareholders (e.g., its dividend policy). A firm's decision on this problem influences how much cash and marketable securities it will hold. Explain why this is true and what are the key factors driving this linkage. The residual dividend model address this issue in a particular way. What does the residual dividend model say that firms should do? Finally, many U.S. corporations have chosen to kick out cash to shareholders through stock repurchases rather than through cash dividends. We discussed several reasons for this behavior; one that was based on tax considerations, one was based on executive incentives, and a third was based on commitment concerns. Explain these rationales for why U.S. firms are distributing cash more through stock repurchases than cash dividends.

Reference no: EM133325679

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