Dividend irrelevance theory posits that a firm's dividend policy does not affect its stock price or overall value in perfect capital markets. According to this theory, investors are indifferent between dividends and capital gains, meaning the total return on an investment is what matters rather than the specific forms of return. This concept challenges traditional views on the importance of dividends in company valuation.
congrats on reading the definition of dividend irrelevance theory. now let's actually learn it.