Ignoring the Idealized World of MM, Why Might a Higher

question 108

Essay

Ignoring the idealized world of MM, why might a higher dividend payout ratio be considered detrimental to firm value?

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Definitions:

Precautions

Actions taken in advance to prevent potential undesirable outcomes or to minimize risks.

Moral Hazard

A situation where one party in a transaction has the opportunity to assume additional risks that negatively affect the other party because they do not bear the full consequences of their actions.

Contract Changes

Modifications or adjustments made to the terms, conditions, obligations, or rights within a contract between parties.

Behavior

The actions or reactions of an entity, often in response to its environment.