Irrelevance of Dividends A.Current dividends versus retention of earnings M&M contend that the effect of dividend payments on shareholder wealth is exactly offset by other means of financing. *Miller.M.,and F.Modigliani,"Dividend Policy,Growth and the Valuation of Shares,"Journal of Business(October 1961). *Fama,E.and K.French,"Disappearing Dividends:Changing Firm Characteristics or Lower Propensity to Pay?"Journal of Financial Economics(April 2001). The dividend plus the "new"stock price after dilution exactly equals the stock price prior to the dividend distribution. slide 5slide 5 Irrelevance of Dividends Irrelevance of Dividends ƒ M&M contend that the effect of dividend payments on shareholder wealth is exactly offset by other means of financing. *Miller .M., and F. Modigliani, “Dividend Policy, Growth and the Valuation of Shares,” Journal of Business (October 1961). * Fama, E. and K. French, "Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?” Journal of Financial Economics (April 2001). ƒ The dividend plus the “new” stock price after dilution dilution exactly equals the stock price prior to the dividend distribution. A. Current dividends versus retention A. Current dividends versus retention of earnings of earnings