Bird-in-hand theory, Finance Basics

Bird-in-hand Theory

Advanced via John Leitner in year 1962 and furthered with Myron Gordon in year 1963. Argues such shareholders are risk averse and prefer specific. Dividends payments are more specific than capital gains that rely on supply and demand forces to determine share prices.

Hence, one bird in hand as certain dividends is better than two birds in the bush as uncertain capital gains. Consequently, a firm paying high dividends or certainly will have higher value as shareholders will require using lower discounting rate.MM argued against the above proposition. They argued such the required rate of return is independent of dividend policy. They kept such an investor can realize capital gains created by reinvestment of retained earnings, where they sell shares. If this is probably possible, investors would be indifferent between capital gains and cash dividends.

Posted Date: 1/31/2013 2:33:22 AM | Location : United States







Related Discussions:- Bird-in-hand theory, Assignment Help, Ask Question on Bird-in-hand theory, Get Answer, Expert's Help, Bird-in-hand theory Discussions

Write discussion on Bird-in-hand theory
Your posts are moderated
Related Questions
The following is the existing capital structure of Company XYZ Ltd. Ordinary shares at Shs.10 par 1,000,000 Retained 800,000 12% preference shares Shs.10 par 400,000 16% loan Shs.1

Acceptance Rule of Payback Period or PBP By using PBP method a company such will accept all those ventures whose payback period is less than to set via the management and will


Which depreciation method would produce the higher NPV and how much higher would it be?

Require  the relevant authoritative literature on the lower- of- cost- or- market rule for valuing inventory using the FASB's Codification Research System. Clarify the circumstance

From the above case shareholders are very worried that apple is having too much cash,discuss six reasons why shareholders are so worried

Explain the method of Offer of Sale Method of offer of sale consists in outright sale of securities through intermediary of issue houses or share brokers. In other words, sh

Example of Market Model Illustration: For the past five (5) years, the MPS and DPS for XYZ Ltd were follows as:   1998 Shs. 1999 Shs.

Who is Floor Broker Floor brokers aren't many in number. They execute orders for fellow  members  and  receive  a  share  brokerage  commission  charged  by  a commission broke

Determine how much of a total loan payment applies towards principal and how much applies towards interest for a home mortgage of $177,219 with a fixed APR of 7.5% of 20 years