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Dividend Policy and Increasing Discount Rates: A Clarification

Published online by Cambridge University Press:  19 October 2009

Robert C. Higgins
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Extract

For almost a decade, Myron Gordon has argued repeatedly that an enterprise's dividend policy can affect its share price [2, 3, and 4]. The essence of his argument is that risk-averse investors are likely to perceive current dividends as less risky than future ones. Consequently, a corporate decision to reduce current, in favor of increased future, dividends will reduce share prices, even when the funds are invested to yield the firm's cost of capital.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 7 , Issue 3 , June 1972 , pp. 1757 - 1762
Copyright
Copyright © School of Business Administration, University of Washington 1972

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References

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