An efficient signaling equilibrium with dividends and investment, or equivalently, dividends and either sales or repurchases of stock, is constructed and its properties are identified. Because corporate insiders can exploit two signals, the efficient mix minimizes dissipative costs. In...

Better investor protection could lead corporations to undertake riskier but value-enhancing investments. For example, better investor protection mitigates the taking of private benefits leading to excess risk-avoidance. Further, in better investor protection environments, stakeholders like...