Fisher's separation theorem

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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.

Fisher's Separation Theorem

An economic theory stating that the investment decisions of a firm are independent from the wishes of the firm's owners. Fisher's Separation Theorem states that the productive value of a firm's management neither affects nor is affected by the owner's business decisions. As a result, the performance of a firm's investments has no relation to how they are financed, whether stock, debt, or cash. The theorem was devised by economist Irving Fisher. See also: Irrelevance result.

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While the Fisher separation theorem uses standard macroeconomic terminology quite comfortably, it fails to consider the implications of these terms.