Miller and Modigliani hypothesised that dividend policy has a significant impact on shareholder wealth,as it involves a trade-off between higher or lower dividends and issuing or repurchasing ordinary shares.

Question

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Miller and Modigliani's dividend irrelevance theory posits that in a perfect market, the dividend policy of a company does not affect its market value or shareholders' wealth. Their theory suggests that the value of a firm is determined by its earning power and investment policy, not by how earnings are distributed between dividends and retained earnings.

Miller and Modigliani Hypothesised That Dividend Policy Has a Significant