Due to a clientele effect,Modigliani and Miller argue that shareholders with different dividend preferences align with firms with different dividend policies in such a way that the value of a firm's stock is unaffected by dividend policy.

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The Modigliani and Miller dividend irrelevance theory argues that under certain assumptions, the value of a firm is independent of its dividend policy. This theory suggests that shareholders with different dividend preferences will self-select into different firms that match their preferences, resulting in no effect on the overall value of the firm's stock. Therefore, due to clientele effect, Modigliani and Miller argue that the value of a firm's stock is unaffected by dividend policy, making option A true.

Due to a Clientele Effect,Modigliani and Miller Argue That Shareholders