Contrast the main dividend policy theories and, for a described dividend decision by a company, explain what each theory implies for its share value

Three views compete. Miller and Modigliani's irrelevance theory says that with no taxes or transaction costs payout cannot change value, because investors can create a homemade dividend by selling shares or reinvest a dividend they do not want. The bird-in-the-hand view holds that investors value a certain dividend above uncertain gains, so a higher payout lowers the cost of equity and raises price. The tax aversion argument says that where dividends are taxed more heavily than capital gains, a lower payout (or repurchases) serves taxable investors better. Clienteles form around each preference. It is easy to mix up which theory implies higher or lower value from a higher payout, so link each theory to its direction.