Asquith and Mullins studied a sample of firms that either paid their first ever cash dividend or initiated a dividend after a 10 year period of no dividends. Healey, Palepu and Michaely, and Thaler and Womack found stock prices to fall when dividends are. Explain how these positive and negative stock price results fit with the dividend irrelevance argument of MM and the opposing effects of taxes and current income needs on stock price if future earnings are held constant.

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The Answer of Asquith and Mullins studied a sample of firms that either paid their first ever cash dividend or initiated a dividend after a 10 year period of no dividends. Healey, Palepu and Michaely, and Thaler and Womack found stock prices to fall when dividends are. Explain how these positive and negative stock price results fit with the dividend irrelevance argument of MM and the opposing effects of taxes and current income needs on stock price if future earnings are held constant.

Asquith and Mullins Studied a Sample of Firms That Either