Under the ideal conditions of perfect capital markets,dividend policy has no effect upon share price.

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In perfect capital markets, all investors have access to the same information and can buy or sell shares freely without transaction costs. Therefore, dividend policy does not affect the value of the firm or its share price. Investors can create their desired income stream by buying or selling shares, depending on their individual preferences for income versus capital gains. This is known as the dividend irrelevance theory, proposed by Miller and Modigliani in 1961.

Under the Ideal Conditions of Perfect Capital Markets,dividend Policy Has