Fisher's Separation Theorem

Fisher's Separation Theorem

A theory stating that:

1. A firm's choice of investments are separate from its owner's attitudes towards the investments.

2. It is possible to separate a firm's investment decisions from the firm's financial decisions.

Notes:

This theory says a firm's value is not affected by how its investments are financed or how the distributions (dividends) are made to the owners.

See also: Finance

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Fisher's separation theorem

The notion that a firm's choice of investments is separate from its owner's attitudes toward investments. Also referred to as portfolio separation theorem.