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Dividend policy relevance in a levered firm—The binomial case

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  • Galai, Dan
  • Wiener, Zvi

Abstract

In this paper we illustrate a world with perfect capital markets and with no taxes, and show the condition under which the stockholders in a levered firm will be (un-) affected by the dividend policy. We illustrate it for a firm’s value which follows the binomial distribution.

Suggested Citation

  • Galai, Dan & Wiener, Zvi, 2018. "Dividend policy relevance in a levered firm—The binomial case," Economics Letters, Elsevier, vol. 172(C), pages 78-80.
    • Handle: RePEc:eee:ecolet:v:172:y:2018:i:c:p:78-80
    DOI: 10.1016/j.econlet.2018.08.021
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    References listed on IDEAS

    as
    1. Handley, John C., 2008. "Dividend policy: Reconciling DD with MM," Journal of Financial Economics, Elsevier, vol. 87(2), pages 528-531, February.
    2. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    3. DeAngelo, Harry & DeAngelo, Linda, 2006. "The irrelevance of the MM dividend irrelevance theorem," Journal of Financial Economics, Elsevier, vol. 79(2), pages 293-315, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Alla V. VAVILINA & Lidiya N. LEVANOVA & Irina N. TKACHENKO, 2019. "Interrelation between dividend policy and corporate reputation in Russian companies," Upravlenets, Ural State University of Economics, vol. 10(4), pages 14-23, September.
    2. Ed-Dafali, Slimane & Patel, Ritesh & Iqbal, Najaf, 2023. "A bibliometric review of dividend policy literature," Research in International Business and Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Binomial contingent claim model; Dividend policy; Corporate debt;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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