Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to
A) the clientele effect.
B) the informational content.
C) the optimal capital structure.
D) the relevance of dividends.

Question

Quizplus · Accepted Answer

The clientele effect suggests that investors have different preferences for dividends, and that firms can attract investors with the dividend policy that best suits their needs. This means that the value of the firm is not affected by the firm's dividend policy, as investors can simply choose to invest in firms with dividend policies that they prefer.

Modigliani and Miller Suggest That the Value of the Firm