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Strategies & Market Trends : Dividend Investing -- Ignore unavailable to you. Want to Upgrade?

To: George the Greek who wrote (124)	10/11/2001 3:42:00 PM
From: TigerPaw	Respond to of 387

Nobel Laureate Spence on dividends Why do firms pay dividends to their shareholders, knowing full well that they are subject to higher taxes (through double taxation) than capital gains? Retaining the profits within the firm would appear as a cheaper way to favor the shareholders through the capital gains of a higher share price. One possible answer is that dividends can act as a signal for favorable prospects. Firms with "insider information" about high profitability pay dividends because the market interprets this as good news and therefore pays a higher price for the share. The higher share price compensates shareholders for the extra tax they pay on the dividends. nobel.se