The dividend irrelevance theory, proposed by Miller and Modigliani, says that as long as a firm pays a dividend, how much it pays does not affect either its cost of capital or its stock price.

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The dividend irrelevance theory proposed by Miller and Modigliani states that in a perfect world without taxes, transaction costs, or agency conflicts, the value of the firm is not affected by its dividend policy. However, in the real world, these factors do exist and therefore a firm's dividend policy can affect its cost of capital and stock price.

The Dividend Irrelevance Theory, Proposed by Miller and Modigliani, Says