Dividend irrelevancy theory: Difference between revisions
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imported>Doug Williamson (Reference and link with Capital structure page.) |
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In financial theory dividend payments and policies should be irrelevant when financial markets are efficient. | In financial theory dividend payments and policies should be irrelevant when financial markets are efficient. | ||
But in practice decisions about dividend levels are important because of | But in practice decisions about dividend levels are important because of: | ||
#Their informational content. This informational content is known as ''signalling''. | |||
#The potential to move closer to, or away from, a firm's optimal capital structure. | |||
== See also == | == See also == | ||
* [[Lintner]] | * [[Lintner]] | ||
* [[Residual theory]] | * [[Residual theory]] | ||
* [[Rights issue]] | |||
* [[Capital structure]] | |||
Revision as of 21:49, 15 March 2014
In financial theory dividend payments and policies should be irrelevant when financial markets are efficient.
But in practice decisions about dividend levels are important because of:
- Their informational content. This informational content is known as signalling.
- The potential to move closer to, or away from, a firm's optimal capital structure.
