Question

describe the following theory Signaling theory

describe the following theory Signaling theory

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Signalling theory is basically about how corporate announcements or actions such as dividend payment or stock splits send a signal or message to the outside world or the investors about the state of the company and its future. For example, if a company is giving out strong dividend through the crest and troughs of economic cycle, then it means that the company is having enough cash surplus and it can weather any unforeseen circumstances and thus this can signal the investors to invest as it is a solid company to be investing in.

Similarly if the company has suddenly stopped giving dividends, then it means that either the company is struggling financially or it has found new investment options wherein it would like to deploy additional cash. So there could be scope for capital appreciation.

Thus signalling theory deals with the signalling impacts of corporate actions and announcements.

Add a comment
Know the answer?
Add Answer to:
describe the following theory Signaling theory
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT