Which economists are associated with advocating a middle-of-the-road approach in dividend policy?

The middle-of-the-road approach in dividend policy is often associated with economists who advocate for a balance between retaining earnings for reinvestment and paying out dividends to shareholders. This approach recognizes that while dividends can provide immediate benefits to shareholders, retaining earnings can facilitate growth and long-term value creation.

Miller, Black, and Scholes have contributed significantly to the understanding of dividends in the context of market efficiency and the implications of dividend policies for stock prices. Their analysis suggests that a company’s dividend policy reflects its relative ability to provide returns to shareholders without being cast in an extreme perspective—either fully retaining earnings or distributing them entirely. Instead, they emphasize a balanced perspective where companies consider both the interests of investors who prefer immediate cash flows and those who favor long-term growth.

Their scholarship supports the notion that there isn't a one-size-fits-all approach to dividend policy. This nuanced understanding enables companies to adopt dividend strategies that are aligned with their specific circumstances and the preferences of their investors, encapsulating the essence of a middle-of-the-road approach.

In contrast, other economists associated with different theories or models might emphasize either a strict retention of earnings for growth or a focus solely on dividends without considering the benefits of a balanced policy. This is why the option citing Miller