Stock price decline after firms dividend cut announcement

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Reference no: EM13944538

Although we say that a firm's dividend policy does not matter in an ideal world without frictions (i.e. no taxes, no transaction or issuance costs), in practice, we often observe firms that announce a dividend cut experience a decline in their stock prices after the announcements. What are the possible reasons for the stock price decline after a firm's dividend cut announcement?

Reference no: EM13944538

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