2014
DOI: 10.1108/s0196-382120140000030010
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Abstract: We examine co-founders of a firm and their ability to create an artificial (or "homemade") dividend as in Miller and Modigliani (1961). We show that creating an artificial dividend may decrease the value of the firm because it diverts funds from investment to the consumption of perquisites. Only where there is complete trust in the party to which the shares are sold can a cofounder costlessly create an artificial dividend. It seems likely that a dividend policy would be established at the founding of the firm …

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