Modigliani and Miller's dividend irrelevance theory states that the total value of a firm is dependent on its capital structure.

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Modigliani and Miller's dividend irrelevance theory states that the value of a firm is not dependent on its dividend policy or its capital structure. According to this theory, in a perfect market without taxes or transaction costs, the value of a firm is determined solely by its earning power and the risk of its underlying assets, and not by the way it divides its earnings between dividends and retained earnings or the mix of debt and equity it uses to finance its assets.

Modigliani and Miller's Dividend Irrelevance Theory States That the Total