Dividend irrelevancy theory

From ACT Wiki
Jump to: navigation, search

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.
  3. Possibly, clientele effects.

See also