The dividend irrelevancy proposition states that it does not matter what level of dividend the company pays the share price will remain the same.Hence dividends are irrelevant.

Question

Quizplus · Accepted Answer

The dividend irrelevancy proposition is a controversial theory that suggests that investors are indifferent to whether they receive dividend income or capital gains. However, empirical evidence shows that investors do care about dividends, and higher dividends often lead to higher stock prices. Therefore, the proposition is not entirely true, making option B the correct answer.

The Dividend Irrelevancy Proposition States That It Does Not Matter