17.3 The stock price dropped despite the increase in earnings because investors interpreted the dividend cut as

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17.3 The stock price dropped despite the increase in earnings because investors interpreted the dividend cut as a signal that future earnings would be lower than investors had previously expected. The dividend cut conveyed bad news about the future prospects of the firm.

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Fundamentals Of Corporate Finance

ISBN: 9780073382302

6th Edition

Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus

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