Dividend Irrelevance
Modigliani-Miller (1961) proof that in a perfect-markets world (no taxes, no transaction costs, no information asymmetry), payout policy does not change firm value — an investor who wants more income can synthesize a dividend by selling shares, and one who wants less can reinvest the cash paid. Total wealth is invariant across payout choices. M-M dividend-irrelevance is not a prediction about the real world; it is a BASELINE that lets analysts isolate which specific friction (signaling, tax-clientele, agency) is doing the work in any actual dividend announcement.
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Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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