Question
Do you feel that the below mentioned belief is a limitation of the Model? Please elaborate on the other criticisms cited for the MM Model
Do you feel that the below mentioned belief is a limitation of the Model? Please elaborate on the other criticisms cited for the MM Model with conclusion.
Few analysts believe that a firm's dividend policy is often seen as a testament to its confidence in future earnings growth and sustainability of the business. In the past, shareholders have lodged complaints about companies denying them dividends despite possessing spare cash balances. Finally, SEBI mandated top 500 listed companies (based on market capitalization) to formulate a dividend distribution policy. This mandate was recently revised and is now applicable to top 1,000 listed companies. In response to the revised mandate, many companies like Bajaj Auto have changed their dividend policy in January 2022. However, the Modigliani-Miller (MM) model states that the present value of the firm is independent and unaffected by future dividend payments.
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