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The coronavirus pandemic led to the enforced closure of some businesses (eg. theatres and eat in restaurants) and reduced demand for many businesses that remained

The coronavirus pandemic led to the enforced closure of some businesses (eg. theatres and eat in restaurants) and reduced demand for many businesses that remained open. This has led to falls in revenue and earnings and ultimately, cash flow problems for many company. Because of this increased financial distress, we have seen many companies cut cash dividends as one strategy to conserve cash.

a. Use signalling theory to discuss the likely market reaction to announcements related to these dividend cuts.

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