Why do firms more diverse shareholder bases typically pay

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Question - After working for the past four years as a financial analyst for New Power Corporation, you receive a well-deserved promotion. You have been appointed to work on special projects for Mr. Larkin, the chief financial officer (CFO). Your first assignment is to gather information on dividend theory and policy, because the CFO wants to reassess the firm's current dividend policy.

Required -

1. Why do firms with more diverse shareholder bases typically pay higher dividends than private firms or public firms with more-concentrated ownership structures?

2. How are fixed dividends used as a bonding (commitment) mechanism by managers of firms with dispersed ownership structures and large amounts of free cash flow?

3. What is a stock dividend and how does that differ from a stock split?

Reference no: EM133143710

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