?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=https%3A%2F%2Fmpra.ub.uni-muenchen.de%2F15689%2F&rft.title=Relevance+or+irrelevance+of+retention+for+dividend+policy+irrelevance&rft.creator=Magni%2C+Carlo+Alberto&rft.subject=G35+-+Payout+Policy&rft.subject=G0+-+General&rft.subject=G30+-+General&rft.subject=G31+-+Capital+Budgeting+%3B+Fixed+Investment+and+Inventory+Studies+%3B+Capacity&rft.description=In+an+interesting+recent+paper%2C+DeAngelo+and+DeAngelo+(2006)+highlight+that+Miller+and+Modigliani's+(1961)+proof+of+dividend+irrelevance+is+based+on+the+assumption+that+the%0Aamount+of+dividends+distributed+to+shareholders+is+equal+or+greater+than+the+free+cash+%0Aflow+generated+by+the+fixed+investment+policy.+They+claim+that%2C+if+retention+is+allowed%2C+dividend+policy+is+not+irrelevant.+This+paper+clarifies+and+reinterprets+DeAngelo+and+DeAngelo's+result%3A+Retention+itself+has+not+to+do+with+dividend+irrelevance%2C+which+holds+even+in+case+of+retention.+The+key+assumption+has+to+do+with+the+NPV+of+the+extra+funds+(either+retained+or+raised)%3A+If+NPV+is+zero%2C+dividend+irrelevance+applies.+Yet%2C+the+dichotomy+retention%2Fno-retention+is+useful%2C+because+if+agency+problems+are+present%2C+managers+tend+to+retain+funds+and+invest+them+in+negative-NPV+projects%2C+and+therefore+the+zero-NPV+assumption+must+be+removed%2C+so+that+dividend+irrelevance+does+not+apply+any+more.&rft.date=2007-11-04&rft.type=MPRA+Paper&rft.type=NonPeerReviewed&rft.format=application%2Fpdf&rft.language=en&rft.identifier=https%3A%2F%2Fmpra.ub.uni-muenchen.de%2F15689%2F1%2FMPRA_paper_15689.pdf&rft.identifier=++Magni%2C+Carlo+Alberto++(2007)%3A+Relevance+or+irrelevance+of+retention+for+dividend+policy+irrelevance.++Forthcoming+in%3A+Applied+Economics+Research+Bulletin+(Peer-Reviewed+Working+Paper+Series)++++&rft.language=en