POLITICAL COSTS HYPOTHESIS Definition

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POLITICAL COSTS HYPOTHESIS predicts that firms with low agency and political costs and effective shareholders monitoring will distribute cash dividend and those with moderate agency and political costs may use stock dividends in lieu of cash dividends to separate themselves from firms having high agency and political costs. This indicates that cash dividend firms will face better long-term stock market valuation of their shares than stock dividend firms.

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CASH SETTLEMENT, in short-term securities, is payment and delivery made on the same day as the trade date.

STREET NAME, in securities, is securities held in the name of brokers, banks or their nominees, instead of in the customer's name.

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