Dividend irrelevancy theory: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Administrator
(CSV import)
 
imported>Doug Williamson
(Reference and link with Capital structure page.)
Line 1: Line 1:
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 their informational content. This informational content is known as ''signalling''.
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:

  1. Their informational content. This informational content is known as signalling.
  2. The potential to move closer to, or away from, a firm's optimal capital structure.


See also