The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares of stock is called:

Question

Quizplus · Accepted Answer

The concept of "homemade dividend policy" refers to the ability of shareholders to create their own dividend policy by either reinvesting dividends or selling shares of stock to mimic the effect of a different dividend policy than that chosen by the firm. This concept suggests that the firm's dividend policy is irrelevant to the wealth of its shareholders, as they can adjust their own cash flows to suit their preferences.

The Ability of Shareholders to Undo the Dividend Policy of the Firm