How does Jensen's free cash flow hypothesis relate to a firm's dividend policy?

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Jensen's free cash flow hypothesis suggests that dividends help discipline management by requiring them to return excess cash to shareholders, which can reduce the likelihood of management spending on projects that do not maximize shareholder value (often referred to as empire building). This is because when firms generate more cash than what is necessary for efficient operations and investments, management might be tempted to invest in suboptimal projects. By paying out dividends, the firm reduces the free cash flow available for such potentially wasteful expenditures.

How Does Jensen's Free Cash Flow Hypothesis Relate to a Firm's