Question

Paternalistic high growth companies like to

• A. Pay lower dividends
• B. Pay higher dividends
• C. Dividends are not affected by growth consideration
• D. None of these

Hint:

Paternalistic companies focus on balancing growth and dividends, and they may prioritize rewarding shareholders with higher dividends.

Answer 1

The Correct Option is B

Step 1: Understanding paternalistic high growth companies.
Paternalistic companies prioritize long-term growth and often reinvest profits into the business to fuel that growth. In doing so, they typically pay lower dividends to shareholders in order to retain funds for expansion. However, high-growth companies that are paternalistic may also pay higher dividends if their focus is on providing value to shareholders while maintaining a growth trajectory.
Step 2: Analyzing the options.
(A) Pay lower dividends: Incorrect. While many high-growth companies pay lower dividends, paternalistic companies may prioritize paying higher dividends.
(B) Pay higher dividends: Correct. High-growth paternalistic companies may opt to reward shareholders with higher dividends, especially if they are financially stable.
(C) Dividends are not affected by growth consideration: Incorrect. Growth consideration generally affects dividend payouts in high-growth companies.
(D) None of these: Incorrect. Option (B) is correct.
Step 3: Conclusion.
The correct answer is (B) Pay higher dividends based on the nature of paternalistic high-growth companies, which sometimes favor rewarding their shareholders while continuing their growth trajectory.