The main objective of this chapter is for students to demonstrate that they can identify the manner in which biases and framing impact the behavior of managers, investors, and market prices in respect to dividend policy.
After completing this chapter students will be able to:
- Explain why framing effects lead some investors to find cash dividends attractive.
- Identify conditions under which managers cater to investors’ preference for cash dividends.
- Describe heuristics that managers use to set the dividend policies of their firms.
- Describe the manner in which managers view dividends differently from share repurchases.