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Why don't all firms pay dividends? Should they?

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A substantial percentage of the companies listed on the NYSE and the NASDAQ do not pay dividends, but investor are nonetheless willing to buy shares in them.
1. Discuss the factors that may drive this decision for an investor.
2. Explain whether or not you would recommend this behavior.

Two paragraphs.

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Solution Summary

Introductory students often assume that firms that do not pay dividends are not able to do so. Not true. This discussion explains why.

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1. Some investors are in a high tax bracket and would prefer the earnings to be reinvested and grow the value of the shares rather than have the funds returned to them in the form of ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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