Question

Discussion topic------"Clientele effect, tax differential, agency cost and information asymmetries affect the dividend value perceived by investors".

Express your views on this statement. Justify your answer citing appropriate examples from Suadi Firms.

(150-200 words)

Answer 1

Ans: yes cleantele effect, Tax differential, Agency cost, Information asymmetries do effect the dividend value perceived by the investors. To understand the above Statement let us under- - stand the relationship of dividend with the given factor mentioned . at is we knoow related to that demand the and a movement in in stock aspiration of price investors. The overall change in tax, dividend policy con other may effect the price of share and hence the demand o investor. clientele effect thus definitely plays an important role in dividend policy of company. The increased increased dividend payout may lead to increased demand of client and hence the increased share price. However considering the fact that capital gains are taxed at lower rate than dividend and profitability of equity appreciation is -

- more than important an dividend tax differencial view role in driving the dividend en such case can be retained preferred policy and So dividend equity ps . Agency cost on the other hand is cost that are ses between management, and share holder between management and becose of their own seperate interest. An org- anisation pays out dividend to mitigate th to mitigate this Cost establishing Inverse relationship between two: increased agency cost may than lead to reduce dividend Payout 1 Information asymmetry as a word Suggest means there is an imbalance between parties in their broowledge factor and details that drives decision making to ensure loe understand the profitability better, information H asymmetry definitely ensures of one party having competitive advantage over other so better insight information would lead to an investor to make more pnformed decenions enabling -