What is meant by the signaling effects of dividend policy

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1. What legal constraints limit the amount of cash dividends that may be paid by a firm?

2. What aspects of U.S. tax laws tend to (a) encourage and (b) discourage large divi- dend payments by corporations? Explain how.

3. What other "external" factors limit a firm's ability to pay cash dividends?

4. What is the likely impact of a highly inflationary economy on a firm's ability to pay dividends? Would you expect this impact to be greater or smaller for a rapidly expanding firm? Why?

5. Explain what is meant by the clientele effect.

6. Explain what is meant by the informational content of dividend policy.

7. Explain what is meant by the signaling effects of dividend policy.

8. In the theoretical world of Miller and Modigliani, what role does dividend policy play in the determination of share values?

Reference no: EM13927275

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