Why dividends beat buy-backs

Why dividends beat buy-backs

One of finance theory's more outlandish notions is that public companies should be indifferent to the relative levels of debt and equity in their capital structure. Hence shrinking the equity base of the company, and its cash, should not matter. But the theory has been roundly debunked by the credit crunch. It is one of those ideas with a logical basis - to minimise the cost of capital - that doesn't survive contact with the real world.

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