Dividend irrelevancy theory: Difference between revisions
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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: | ||
Revision as of 20:23, 14 November 2016
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.
- Possibly, clientele effects.
