The concept of a bird in the hand theory

According to the analysis of investors' psychological state, this theory can be said to be the most popular and lasting dividend theory.

Gordon is the most important representative of this theory, the core of which is that in the eyes of investors, dividend income is more reliable than the capital gains brought by retained earnings, so companies need to pay higher dividends to shareholders on a regular basis, emphasizing the importance of dividend distribution.

Its initial performance is the dividend importance theory, which was later developed by William Ms, lintner, Walter and Miron Gordon into the "bird in the hand" theory.

meaning

The theory of "bird in the hand" emphasizes the importance of dividend payment, and holds that "two birds in the bush are worth a bird in the hand" is developed from the theory of dividend importance. This theory reflects the traditional dividend policy and lays a theoretical foundation for the diversified development of dividend policy.

The theory of "bird in hand" is a qualitative description of dividend theory, which is widely held in practice, but it cannot accurately describe how dividends affect stock prices.

According to the "bird in the hand" theory, there is great uncertainty in the return brought by reinvestment of retained earnings to investors, and the investment risk will further increase with the passage of time. Therefore, investors prefer to pay dividends in cash rather than leave the profits to the company. The more dividends a company pays, the greater its market value.