Which one of the following events is perceived as a negative signal?
Group of answer choices
A firm issues new shares of stock on the market, aka a SEO.
A firm cuts its dividend.
A firm stops repurchasing shares of its stock.
Both A and B
All of the above are correct.
Answer:- All of the above are correct
Explanation:-
Reason for A:-Increases in the total capital stock by issuing new shares may negatively impact existing shareholders since it will result into share dilution.
Reason for B:- Markets react negatively to a company's dividend cut announcement because investors and analysts fear the worst for the company.
Reason for C:- When a company buys back shares, it gives an indication that the company is facing very positive prospects that will place upward pressure on the stock price and if a firm stops it then it may perceived as a negative signal.
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