Financial Management - DIVIDEND POLICIES
Dividend Relevance - DIVIDEND POLICIES
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Myron Gordon and John Lintner have argued that shareholders are generally risk averse and prefer a dividend today to the promise of the greater dividend in the future.
Dividend
Relevance
Bird-in-the-Hand Argument
Myron Gordon and John Lintner have argued that shareholders are generally risk averse and prefer a dividend today to the promise of the greater dividend in the future. Hence shareholder’s required return is affected by a change in the dividend policy: Reducing today’s dividend to invest in the firm at the initial required rate of return destroys value if shareholders’ required rate of return increases due to this decision.
Bird-in-the-Hand Argument
Myron Gordon and John Lintner have argued that shareholders are generally risk averse and prefer a dividend today to the promise of the greater dividend in the future. Hence shareholder’s required return is affected by a change in the dividend policy: Reducing today’s dividend to invest in the firm at the initial required rate of return destroys value if shareholders’ required rate of return increases due to this decision.
Tags : Financial Management - DIVIDEND POLICIES
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