Business, Management and Accounting
4 years ago

Debt vs. Dividends: New Study Reveals Surprising Financial Strategies

1 view
Review of Financial Studies
Testing Trade-Off and Pecking Order Predictions About Dividends and Debt
Eugene F. Fama, Kenneth R. French

Paper Summary

The article examines the relationship between dividends and debt in companies. The researchers tested two theories, the trade-off theory and the pecking order theory, to see which one better predicts how companies make financial decisions. They analyzed data from various companies to draw their conclusions. The main findings suggest that companies tend to prioritize paying dividends over taking on debt, supporting the pecking order theory.

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