Fisher's Separation Theorem

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DEFINITION of '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.

INVESTOPEDIA EXPLAINS 'Fisher's Separation Theorem'

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.

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