The concept of signaling suggests that a firm's dividend policy is irrelevant to the value of its common stock.

Signaling

The act of using information to convey a message about the quality or desirability of a product, service, or investment, often in situations where there is asymmetric information.

Dividend Policy

A company's approach to distributing profits to its shareholders, determining the size and timing of dividend payments.

Common Stock

A type of equity investment representing ownership in a corporation, with holders entitled to vote on corporate issues and receive dividends.